Ahead of its first-quarter report, Amazon is drawing intense Wall Street scrutiny for two massive, intertwined bets: a landmark investment in artificial intelligence and a historic capital expenditure plan. Analyst optimism is rising, with firms like KeyBanc and Bank of America significantly hiking their price targets, sending the stock higher.
The centerpiece of this optimism is a deepened strategic partnership with AI startup Anthropic. Amazon has committed an initial $5 billion to the company, with the potential for an additional $20 billion tied to commercial milestones. In return, Anthropic has pledged to spend over $100 billion on Amazon Web Services (AWS) technology over the next decade. This includes securing up to five gigawatts of capacity on Amazon’s proprietary AI chips, like Trainium and Graviton, and integrating its Claude platform directly into AWS for customer access.
Analysts are quick to quantify the potential impact. Bank of America estimates the Anthropic deal alone could add roughly $1.3 billion in quarterly revenue to AWS. The bank, alongside KeyBanc, has raised its price target for Amazon shares, with KeyBanc setting a new target of $325. Bank of America reinforced its Buy rating with a $298 target. The market responded favorably, with the stock recently trading at 217.05 EUR, marking a daily gain of 3.48% and bringing its recent 52-week high within reach.
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This AI thrust is part of a broader, aggressive infrastructure expansion. Amazon has outlined plans for approximately $200 billion in capital investments by 2026, primarily directed toward data center infrastructure to support cloud and AI demand. CEO Andy Jassy noted that AWS’s AI revenue is already running at an annualized pace exceeding $15 billion, with demand far outstripping current capacity. The company’s Trainium AI chips are reportedly sold out for much of the current year.
However, this growth narrative faces near-term pressures and risks. The company’s free cash flow declined to just over $11 billion in the last fiscal year. Rising fuel costs, supply chain disruptions linked to geopolitical tensions, and expenses related to internal projects are expected to weigh on margins in the first half of the year. KeyBanc analyst Justin Patterson also flagged potential headwinds from geopolitical risks and possible new U.S. tariffs that could impact the e-commerce segment, noting a recently introduced fuel surcharge for third-party sellers only partially offsets these pressures.
All eyes are now on the quarterly results scheduled for April 29. Investors will be looking for confirmation that the colossal investments in data centers and AI are translating into tangible customer growth. Bank of America projects AWS revenue will surge 28% year-over-year, a significant acceleration. Any sign of weaker cloud growth could immediately raise questions about the sustainability of Amazon’s aggressive spending strategy. The options market currently reflects caution, assigning a low probability to the stock reaching $260 by the end of April.
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