Morgan Stanley believes Amazon's stock could double. Should you buy it?

Amazon's stock could rise by more than 90% by the end of 2027 and reach $500 per share if the company's cloud service—Amazon Web Services (AWS)—is able to significantly increase its revenue amid high demand for AI computing power. Barron’s reports this, citing Morgan Stanley analyst Brian Novak.

In its base-case scenario, Morgan Stanley values Amazon shares at $335 each, which implies an increase of approximately 28% from the closing price on August 17. However, Novak believes the company’s shares could reach an even higher target of $500 per share.

In a recent research note, he noted that the company’s cloud division—AWS—is capable of increasing annual revenue by 490% from current levels, to approximately $1 trillion, over the next eight to ten years (AWS currently generates about $170 billion in annual revenue), according to MarketWatch. And the company’s earnings before interest and taxes (EBIT) could reach $500 billion by the middle of the next decade. Such a scenario implies that Amazon’s stock will be valued at $500 per share by the end of 2027, according to a Morgan Stanley note; that is, it implies the stock price will nearly double from its current level of $261.31.

Novak cites demand for computing power for generative AI as a key driver of AWS’s growth. Amazon did not disclose exact figures regarding its current capacity in its latest financial report. For the quarter ending in September of last year, the company reported that it had increased the capacity of its data centers by 3.8 gigawatts (GW) over the previous 12 months. And during the most recent conference call, Amazon CEO Andy Jassy confirmed that the company plans to double its capacity by the end of 2027—compared to 2025 levels.

According to Morgan Stanley’s estimates, Amazon will therefore need to increase its computing capacity by approximately 8 GW in 2026 and maintain the same pace in 2027. The ability to monetize this capacity will determine how quickly AWS can grow its revenue, the analyst believes. Already, according to Novak’s estimates, AWS generates about $8 in revenue for every additional watt. Morgan Stanley anticipates this figure could rise to $12. With this level of monetization, AWS’s revenue could reach $1 trillion by 2035, the analyst calculated.

However, reaching the $1 trillion target is far from a guaranteed outcome, MarketWatch notes. First, Novak’s estimates are based on the assumption that demand for computing power will continue to grow. Second, after 2028, Amazon’s ability to expand its capacity will depend on a number of unknown factors. These include the volume of server and rack equipment purchases, energy efficiency, as well as potential regulatory barriers and restrictions on the pace of data center construction.

Any estimate on the scale of $1 trillion is “a bold speculation,” D.A. Davidson analyst Gil Luria told MarketWatch. In his view, it’s quite reasonable to expect AWS to grow by 40–50% this year, but “extrapolating beyond that [period] is more than just ambitious.” “Neither Jassy nor anyone else has clear data to quantify a market that didn’t exist three years ago,” Luria noted.

In early August, Amazon briefly joined the “club” of companies with a market capitalization of over $3 trillion. It achieved this milestone after reporting that AWS revenue had grown by 37% in the most recent quarter—the highest rate in the past four years. However, since its record closing price of $284 per share on August 3, the company’s stock has already fallen by more than 7%. On Monday, August 17, Amazon shares fell another 0.5%. However, they are still up more than 13% year-to-date.

Wall Street also views Amazon’s outlook positively: according to MarketWatch, 66 analysts who cover the company’s stock recommend buying it, while three others maintain a neutral rating. There are no sell recommendations for Amazon shares. The average price target set by Wall Street analysts is $329.8, which implies potential growth in Amazon’s market capitalization of approximately 26% relative to the closing price on August 17.

This article was AI-translated and verified by a human editor