Wall Street analysts have given Amazon (AMZN) stock a forecast upgrade. However, fighting in the AI space can put resistance to that performance. In a constantly challenging AI race, several top American companies are throwing hats at the ring, throwing billions of people at AI data centers and other artificial intelligence innovations. Amazon is one of the biggest investors, but according to many analysts, increasing competition is a concern for AMZN stocks.
Amazon Web Services has the largest market share in the AI space, followed by Microsoft’s Azure and Alphabet Inc.’s Google Cloud Platform. However, the big growth of Oracle and CoreWeave has recently suggested that there are fourth and fifth major players in this sector. Unlike these players, Amazon (AMZN) stock has declined over the past month. In comparison, Alphabet stocks trade 22 times more advanced revenues. This is a modest premium for the company’s long-term average. It was less than Amazon’s multiple, but the gap was much wider. Amazon’s shares fell 0.6% on Thursday, with Alphabet rising 0.1% and Oracle rising 1.7%. Microsoft hasn’t changed much.
Why was Amazon (AMZN) down last month?
Amazon’s recent DIP comes amidst the fear that the company doesn’t meet the high expectations set for itself. Amazon is planning to spend up to $100 billion on AI this year. With operating profit guidance of $20.5 billion to $20.5 billion for the current quarter, midpoints are less than Wall Street’s estimate of $19.5 billion. With growing concerns that AI investments could not be rewarded for businesses, Amazon is one of the largest spenders in the US in a burgeoning industry.
Additionally, while some Wall Street analysts reflect this concern, others are split. “Q2 provided the first warning signal that AWS was behind Azure when it won the AI work flow, but it’s falling even further into Oracle and Core Wave,” said Clare Pleydell-Bouverie, co-manager of the Liontrust Global Innovation team in London. Meanwhile, of the 71 analysts voted by FactSet, 68 Amazon stocks are either purchased or equivalent, with an average price target of $264. “While losses of share are still important, we are comforted by the growth of a stronger industry and the increase in AWS estimates,” writes Ken Gaurelski of Wells Fargo. Most of Wall Street agrees to Wells Fargo’s ratings.
Overall, Amazon’s stocks traded almost flat that year. The stock is hovering just above Amazon’s 200-day moving average for the past few trading days. Amazon has not fallen below its long-term investor support level since early May.
