A stronger cloud outlook helped drive Amazon shares about 5% higher on Monday after Morgan Stanley selected the company as its top investment pick and increased its target price. The advance would mark Amazon’s best daily performance in approximately three months.
The recommendation comes amid a more selective approach to technology stocks, with investors preferring large cloud businesses with substantial financial resources to more heavily indebted companies involved in AI expansion. Amazon already commands broad analyst support: LSEG figures show 62 Buy or Strong Buy recommendations among 64 analysts, alongside a consensus target of approximately $330.
Morgan Stanley retained its “Overweight” recommendation but moved its target from $335 to $350. Against Friday’s closing price of $250, that represents potential appreciation of around 40%. Analyst Brian Nowak identified five possible drivers of a higher valuation, outlining upside and downside scenarios of $410 and $220, respectively, for an approximately three-to-one risk-reward balance.
Central to the bank’s assessment is a faster expansion at Amazon Web Services. Its revised revenue projections call for growth of 47% for 2027, compared with 41% previously, and 42% for 2028, versus an earlier 37% estimate.
Those revisions reflect Nvidia’s expectation that AWS will purchase and put into operation approximately 2 million of its GPUs during 2027 and 2028. In Nowak’s assessment, investors have yet to fully recognize the cloud division’s scope for revenue and profit growth.
Building that capacity will require more investment. The bank’s updated capital expenditure estimates for Amazon stand at $355 billion for 2027 and $365 billion for 2028.
Morgan Stanley also projects AWS operating margins reaching 42% and 44% in those respective years. That profitability would help Amazon generate approximately $16.50 in earnings per share in 2028, according to the bank. Applying a multiple of roughly 21 to that forecast produces its $350 target.
Other potential sources of valuation support extend beyond cloud infrastructure. As businesses direct spending toward inference, the bank sees an opportunity for Bedrock, Amazon’s platform for developing applications using AI models from third parties.
Nowak also sees Amazon benefiting from agentic commerce, where AI agents find goods and make purchases for users. He expects the company to remain successful in that market despite Meta’s introduction of Muse, its consumer AI agent.
Automation offers another potential catalyst for 2027. The bank calculates annual savings of $2 billion to $4 billion if robotics-equipped fulfillment centers handle an additional 10% of Amazon’s worldwide order volume. Management intends to more than double the number of robotic arms in use during 2026. Morgan Stanley views the expansion as a potential demonstration of Amazon’s position in physical AI.
The next scheduled financial update is Amazon’s third-quarter earnings report, due on October 29 following the close of U.S. trading.
