Analysts at JPMorgan reiterated their Overweight rating and price target of $240 a share on Amazon (NASDAQ:AMZN) in a note this week, highlighting the company's significant strides in generative AI.
The investment bank said the AWS NYC Summit on Wednesday underscored the pivotal role of GenAI, with Amazon's AWS VP of AI Products, Dr. Matt Wood, confirming that GenAI has already evolved into a multi-billion dollar business.
Analysts estimate this segment to be generating approximately $2 billion to $3 billion annually, with potential to grow into a "tens of billions of dollars" revenue opportunity in the coming years.
AWS boasts "hundreds of thousands" of AI and machine learning (ML) customers, notes the firm. This indicates robust demand from enterprises, including regulated industries and venture capital-backed startups.
Remarkably, about 96% of AI/ML unicorns and 90% of Forbes AI 50 companies are utilizing AWS. Since 2023, AWS has launched 326 GenAI features in general availability, which the company believes surpasses its leading competitors.
Analysts noted that customers are signing higher commitments with longer durations, and both GenAI and non-GenAI workloads are on the rise.
They anticipate easing optimizations, new workload migrations, ramping GenAI monetization, and favorable year-over-year comparisons to bolster AWS revenue growth through 2024. The firm projects AWS growth of +18% in Q2, +19% in Q3, and +20% in Q4, with a continued +20% growth in 2025.
The firm adds that the AWS Summit also included significant product announcements and enhancements across the tech stack, emphasizing Graviton, Bedrock, Amazon Q, and AWS App Studio. These developments, combined with Amazon's comprehensive data and security-oriented approach, are said to reinforce its differentiated offering in the GenAI space.
With GenAI emerging as a cornerstone of AWS's growth strategy, analysts believe Amazon's stock is well-positioned for continued upward momentum, making it their "Best Idea."