Amazon’s Strategic Pivot: Analysts Forecast Significant Upside Driven by AI and Cloud Resurgence

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Market experts are signaling a potential inflection point for Amazon. Despite its shares gaining a modest 6% in 2025, significantly trailing the S&P 500's near 20% advance, prominent investment firms are positioning for a substantial catch-up rally. Research from Evercore ISI and Zacks Investment Research points to considerable price appreciation potential, fueled by unprecedented capital expenditure in artificial intelligence infrastructure and a reaccelerating cloud computing division.

A central theme in the bullish thesis is Amazon's aggressive investment strategy. In 2025, the company has allocated $125 billion toward capital expenditures, with a clear strategic focus. These funds are directed at developing proprietary AI chips, namely Trainium2 and Inferentia, to lessen dependence on external suppliers like Nvidia. Simultaneously, the company is expanding data center capacity to handle generative AI workloads and securing long-term cloud agreements that provide stable future revenue streams.

AWS Momentum and Analyst Conviction

The resurgence of Amazon Web Services (AWS) is a primary catalyst for optimism. In the third quarter of 2025, the cloud unit expanded by 20% to reach $33 billion in revenue, marking its strongest growth performance in eleven quarters. This revival is largely attributed to soaring demand for AI computing power.

This positive dynamic underpins the conviction of several market strategists. On December 29, Evercore ISI's Mark Mahaney designated Amazon as his "Top Large-Cap Internet Pick" for 2026, projecting approximately 50% upside from current levels. JPMorgan analyst Doug Anmuth also highlighted a pivotal, seven-year $38 billion cloud agreement with OpenAI as evidence of AWS's strengthening competitive position and future revenue visibility.

Operational Streamlining and Core Strengths

Alongside its AI offensive, Amazon is refining its operational footprint. The company recently confirmed the discontinuation of its planned drone delivery initiative in Italy, a move aligned with a broader strategy to reduce experimental costs. Resources are being concentrated on high-growth segments such as AWS and advertising.

Concurrently, the retail and logistics giant continues to bolster its established dominance. Its same-day delivery service for groceries has now been extended to cover more than 2,300 U.S. cities.

Valuation and Market Perspective

Amazon's stock currently trades around $232. While technology peers like Alphabet surged over 60% in 2025, Amazon's more subdued performance reflects investor caution regarding its massive spending outlays. The fundamental outlook for 2026, however, appears divergent.

An overwhelming 96% of covering analysts maintain a buy recommendation on the equity. The median price target sits near $295, implying a 27% potential advance. The shares trade at a price-to-earnings multiple of 32.8. Technical analysts from the Moomoo Community have identified a "Closing Pennant" chart pattern following the Q3 earnings report—a formation that often precedes significant price volatility.

Positioning for the Long Term

The market narrative is shifting. What was perceived as a disappointment in 2025 may transform into a core strength in 2026. With AWS growth accelerating, long-term AI contracts secured, and a clear bullish consensus among researchers, the company is positioning for what many see as an AI super-cycle. Investors are currently weighing the short-term margin pressure from a $125 billion investment program against the long-term revenue visibility it promises. The coming quarters will reveal whether this aggressive capital deployment translates into expanded market share and improved profitability.