Morgan Stanley expects Amazon's stock to rise by 40%. What do AI agents have to do with this?

Amazon’s stock could rise by 40% thanks to the growth of its cloud business, the expansion of AI-powered shopping, and the automation of logistics, according to a Morgan Stanley analyst. The bank raised its price target for the online retailer’s stock from $335 to $350 and added it to its list of top investment ideas, maintaining an “overweight” rating.

Against this backdrop, Amazon's stock rose 5% on October 19, to $262.6 per share; year-to-date, it is up nearly 14%.

Investors are underestimating the impact on Amazon’s business and stock of its cloud division, Amazon Web Services (AWS), which provides computing power and infrastructure on a pay-as-you-go basis, according to Morgan Stanley analyst Brian Novak, as reported by CNBC. He estimates that AWS will be able to maintain high revenue growth rates through 2028, which should generate substantial profits, Barron’s reports. The development of the Bedrock service for building and scaling applications based on generative artificial intelligence could provide additional support for the business, Novak believes. Overall, Morgan Stanley expects AWS’s annual revenue growth to reach 47% in 2027, according to CNBC.

At the same time, Amazon’s infrastructure development expenses will remain high. According to the analyst’s estimate, the company’s capital expenditures could reach $355 billion in 2027 and $365 billion in 2028, partly due to additional chip purchases. Despite the scale of the investments, the analyst remains confident in AWS’s strong growth and profitability, Barron’s notes.

The analyst cites the spread of agent-based commerce—in which AI agents help users select products and make purchases—as another potential driver of growth. According to Novak, Amazon is one of the key platforms for this type of commerce and one of its main beneficiaries: the company will be able to monetize this area thanks to its leading e-commerce infrastructure and loyal customer base. Even Meta’s launch of its personal AI agent, Muse, does not change this assessment. In September, Amazon banned the use of Muse on its marketplace, citing the relatively low quality of the bots’ performance and expressing opposition to automated purchases. If Muse is unable to generate successful sales during the holiday season without Amazon’s involvement, this will serve as further confirmation of just how important the company is for scaling agent-based commerce, the analyst believes.

In addition, Amazon could become one of the leaders in the field of physical AI—that is, robotics based on artificial intelligence. The scale of the expansion of its network of robotic logistics centers in 2027—through the construction of new facilities and the modernization of existing ones—may indicate that the company is also gaining ground in this area, Novak believes, according to CNBC.

Most Wall Street analysts remain optimistic about the company's prospects. According to Marketwatch, of the 71 analysts covering Amazon stock, 69 recommend buying it. The remaining two advise holding the stock in their portfolios.

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