Amazon's AI Bet Is Big, But Will Investors Stick Around For The 'Lumps'?

Amazon.com Inc's AMZN latest earnings call sent investors into a brief panic, with shares slipping 4% post-report. But was it really thesis-changing?

JPMorgan's Doug Anmuth doesn't think so. The big talking point?

Amazon Web Services’ (AWS) growth trajectory and a single word from Amazon's scripted remarks: “lumpy.”

AWS & AI: The Perfect Growth Catalyst?

Lumpy isn't usually a word that rattles Wall Street, but the Street heard “volatile” instead of “long-term upside.” AWS growth is expected to slow in early 2025 before accelerating in the second half, with CEO Andy Jassy assuring investors that supply constraints should ease. But that's contingent on Nvidia Corp‘s NVDA chips, Trainium2, and a host of tech bottlenecks playing along. Anmuth remains optimistic, standing by an 18% AWS growth forecast for 1H25, ramping past 20% in 2H25 and beyond.

Meanwhile, Amazon's 2025 capex outlook of $105 billion—well above Street expectations—has some investors worried about free cash flow. But Anmuth argues that AI investments will pay off, likening Amazon's infrastructure push to the competitive advantages enjoyed by Meta Platforms Inc META and Alphabet Inc‘s GOOGL GOOG Google.

If Jevons Paradox holds true, lower inference costs could actually boost AWS revenue, as customers deploy more AI-driven applications.

Beyond cloud, Amazon's international business faces macroeconomic headwinds, particularly in Germany where growth has decelerated. FX pressures and last year's leap day also complicate Q1 revenue comps. Still, Amazon's logistics efficiency continues to improve, with same-day delivery expansion and robotics-driven cost reductions providing a silver lining.

Investor Takeaway: Is Amazon Set For A Big Move?

So what's the bottom line? Anmuth sees Amazon as a multi-year winner in both e-commerce and cloud, even if the road ahead has some bumps. His $270 price target reflects confidence in Amazon's AI monetization and operating margin expansion. For long-term investors, the message is clear: ignore the lumps, follow the growth.

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