Amazon AI bets show results, market value quietly approaches 3 trillion

Amazon’s AI strategy deployment is accelerating its realized returns, driving the company’s stock price to rebound strongly from this year’s lows, with a market capitalization exceeding $2.9 trillion, just a step away from the global “3 Trillion Club” of elite companies.

Since hitting bottom on March 27, Amazon’s stock has risen a total of 36%, making it the fourth-largest contributor to the 17% increase of the S&P 500 index during the same period, accounting for 7.4% of the contribution. In April alone, the stock surged by 27%, marking its best monthly performance since 2007. Year-to-date, Amazon has added approximately $438 billion in market value.

The core driver of this rebound is: Amazon Web Services’ (AWS) latest quarterly revenue growth rate reached a new high in over three years, confirming sustained strong demand for AI; the company also disclosed that its Trainium custom AI chips have accumulated over $225 billion in revenue commitments. Wall Street confidence has quickly risen as a result, with 79 out of 83 analysts tracked by Bloomberg giving buy ratings, making it the top among all large-cap stocks.

However, doubts also exist. Amazon’s capital expenditure forecast for 2026 approaches $200 billion, the highest among S&P 500 constituents. Whether massive AI investments can translate into substantial returns remains a key unresolved question.

AWS Leads, Chip Demand Validates AI Monetization Path

Amazon’s strong rebound reflects a significant increase in investor confidence in its diversified AI monetization capabilities.

AWS quarterly revenue growth hit a new high in over three years, indicating that enterprise cloud demand remains robust under the AI wave. Meanwhile, the over $225 billion revenue commitment for Trainium custom AI chips not only directly boosts revenue expectations but is also interpreted by the market as a strategic signal with profound implications.

Stephen Lee, founding partner of Logan Capital Management, said: “AWS is showing strong growth, and the robust demand for its custom chips not only benefits revenue but also suggests Amazon may gain some autonomy over computing costs, creating a real pricing advantage.” Logan Capital holds Amazon stock.

Stephen Lee further pointed out that there are strong synergistic effects among Amazon’s various business segments. The enhancement of AI capabilities will not only benefit AWS but also bring significant advantages to e-commerce logistics and targeted advertising. “It is poised to be a dual winner in both AI infrastructure development and AI application deployment, making this combination highly attractive.”

Wall Street Consensus Bullish, Valuation Still Has Room for Discount

Analysts are generally optimistic, and with earnings expectations being raised, Amazon’s current valuation appears relatively low in historical terms.

Bloomberg data shows that over the past month, the consensus forecast for Amazon’s 2026 earnings per share has been raised by 14%, and revenue expectations have also increased. Based on the expected P/E ratio, Amazon is currently only about 25 times earnings, significantly below the 10-year average of 46 times. In late March, this multiple even fell to its lowest level since the end of 2008.

The average target price on Wall Street is $313, implying about 16% upside potential from the current stock price.

Amazon’s heavily held position in Anthropic PBC is reportedly seeking a new round of financing, with a valuation possibly exceeding $900 billion. In February, Amazon also reached an agreement with OpenAI, committing to invest $29k, while OpenAI pledged to invest $30k on AWS over the next eight years. Stephen Lee said:

“We are very confident that Amazon’s AI strategy is working and will continue to deliver strong growth over the coming years.”

High Capital Expenditure, Return Concerns Limit Valuation Upside

Not all investors are optimistic about Amazon’s prospects. Whether the massive capital expenditure can generate sufficient returns remains the biggest uncertainty blocking further stock price appreciation.

Amazon’s capital expenditure forecast for 2026 approaches $200 billion, ranking first among S&P 500 constituents, with this figure expected to further expand to $226 billion in 2027.

Tom Graff, Chief Investment Officer of Facet, expressed caution: “There are huge unknowns about what kind of returns can be achieved from such enormous AI spending. As long as the capital expenditure story continues, valuation multiples could face a ceiling — at which point Amazon may no longer enjoy the profit margins it had when it was a strong cash flow generator.”

Graff admitted that although Facet holds Amazon stock, he personally remains skeptical about the stock, and Amazon is underweighted in his portfolio. “Ultimately, I think it’s more likely to underperform than outperform the market. Too many things need to go right simultaneously, and within a risk-reward framework, the risks here are quite significant.”

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