Three stories are running inside Amazon (AMZN) at once: AWS cloud, AI infrastructure, and advertising spend. Together they add up to a very big number for the company.
AWS and the AI Hardware Shift
AWS grew 37% last quarter to $42.2 billion, and I expect a big earnings beat. AWS is the heartbeat of AI. The market is moving past the "brain" of AI - the software models - and toward hardware: chips, cloud, data centers, networking, and the harnesses that run the AI. Anthropic said about 85% of its software is built by its own machines, now 100%, which shows the shift is already here.
Amazon (AMZN) builds its own hardware, including the Trainium and Graviton chips, so it no longer just depends on Nvidia (NVDA). This is the fastest-growing part of the company. IBM (IBM) is up big on the same hardware theme, and HPE (HPE) is now one of the biggest winners on the S&P.
Why Amazon Wins the Cloud Race
Amazon (AMZN) can take over the space because it already owns the customers - the businesses, the retailers, the buyers, and the vendors on both sides. It is like playing both teams at a baseball game, so it wins no matter the outcome. Businesses that already run their websites and back-end data on AWS have their wallets out and want to spend more to add Amazon's AI to their own systems and selling. A vendor trying to sell more hammers will buy Amazon's data on other vendors. Amazon holds both the data and the users, which gives it an edge.
Should Amazon Break Up?
Should the retail and cloud sides become separate companies? I don't want Amazon (AMZN) split into three companies. It should keep building its ecosystem - built around vendors, buyers, and retailers - plus the pharmacy and grocery businesses. Amazon sells the "pickaxes and shovels" around the whole system and knows how to fit it all together. GE (GE) broke into several companies and GE is up big today, one of the biggest, but Amazon should stay whole and grow.
The Advertising Risk
Ad revenue is growing at 27% (revenue growth cited around 26%). The FTC and 22 states are looking at how Amazon (AMZN) advertises. I am not worried about the suit - Amazon will likely just pay it off and move on, and it has enough money that it won't matter. The real risk is if Amazon has to change how it advertises. Right now it knows what you look at and what you need; search a pencil and you get 35 pencils, search a shirt and you get many shirts. It even knows when you bought a gallon of milk. Since everyone advertises, the FTC would have to go after everyone, not just Amazon.
Price Targets and Strategy
The stock has run from $118 to $287 over three years. I have been buying Amazon (AMZN) straight through the last 10 days and buying dips, because Amazon is the future. Oracle (ORCL) reported yesterday and said its AI capex spending is not stopping, though it may tap it down a little - AI is the key.
My target is 350 to 360 to 370 a share, aiming for a 30-40% return over about a year, and I plan to hold all the way through. Moving away from zero-DTE (same-day-expiry) options trading and toward longer-term investing should produce a strong return. The Graviton and Trainium chip divisions are newer parts of Amazon, so growth could turn exponential rather than staying in single percentages.
