Why Amazon Lags Its Peers In 2025

Amazon.com AMZN is underperforming its tech peers in 2025, trailing the broader market amid intensifying competition in artificial intelligence and cloud infrastructure.

While the S&P 500 has gained around 7% year-to-date and the Nasdaq-100 has risen by 9%, Amazon shares are up just under 2%, underwhelming against the backdrop of a high-growth AI cycle.

Microsoft Corp. MSFT, in contrast, has surged over 19% driven by strong Azure growth and AI integration across products. Microsoft’s success is partly due to its existing enterprise relationships and strategic AI investments, particularly in OpenAI, which have integrated well with Azure’s offerings.

Also Read: Amazon CEO Says Generative AI Will Reduce Total Corporate Workforce

Amazon’s Expanding Footprint And Its AI Bet

Amazon, which began as an online bookstore, has grown into a sprawling conglomerate spanning e-commerce, cloud computing, advertising, streaming, and logistics. In the last five years, Amazon’s revenue from third-party seller services, advertising, subscription services, and Amazon Web Services (AWS) has all achieved double-digit growth.

AWS, which runs data centers and provides software tools, generated 16-17% of the company’s revenue in the last three years, accounting for ~60% or more of its operating income. In a bid to solidify its role in the AI infrastructure arms race, Amazon has committed $100 billion to artificial intelligence initiatives for 2025, surpassing Google parent Alphabet Inc.’s GOOGL GOOG $75 billion and Microsoft’s $80 billion.

AWS unit CEO Matt Garman told Bloomberg in May that it is rapidly expanding its global server farm footprint and increasing access to Nvidia Corp’s NVDA latest AI chips. AWS opened a new data center cluster in Mexico in 2025 and is building additional facilities in Chile, New Zealand, Saudi Arabia, and Taiwan.

Garman highlighted the strong demand for AI infrastructure and confirmed that AWS is working with Nvidia to grow its supply of GB200 semiconductors for customer testing. He also welcomed the opportunity to host OpenAI’s models on AWS.

Brian White of Monness Crespi Hardt emphasized AWS already benefits from training large language models and expects that momentum to grow. White believes the platform is well-positioned for growth in AI inference, a rapidly expanding segment of the cloud market.

Mark Mahaney of Evercore ISI has named Amazon his top stock pick, citing “strong AI-driven cloud potential”. Wedbush’s Dan Ives noted rising enterprise demand for AI infrastructure, with Amazon among the top hyperscale providers alongside Microsoft and Google.

Robotics, Prime, And Profitability

Cost efficiency also remains in focus. Bank of America analysts estimate that Amazon’s integration of robotics and AI could lead to $16 billion in annual cost savings by 2032. The company currently has over 750,000 robots assisting with 75% of customer orders. The company currently has over 750,000 robots assisting with 75% of customer orders.

J.P. Morgan analyst Doug Anmuth identified Amazon Prime as the company’s most valuable strategic asset. He projected that Amazon is likely to raise the price of Prime membership in 2026, consistent with its historical four-year pricing pattern. Anmuth believes a $20 increase could yield $3 billion in annual revenue, without significantly affecting subscriber retention.

Amazon’s Prime Day 2025 event is scheduled to begin on July 8 and will run for four days, with deals across more than 35+ categories, including new segments like groceries and travel. Bank of America analyst Justin Post expects tools like Alexa+ and Rufus to drive Prime Day gross merchandise value to $21.4 billion, a 60% increase over the previous year.

Market Sentiment

Amazon.com currently has a consensus price forecast of $246 based on 39 analyst ratings. The highest forecast came from Tigress Financial, which set a forecast of $305 on May 6, 2025. Raymond James set the lowest forecast at $195 on April 21, 2025. These estimates average out to $246.67, indicating a potential upside of 10.54%.

Analyst Views On Microsoft’s AI Position

Analysts remain positive on Microsoft’s long-term prospects in AI. Derrick Wood of TD Cowen said the company is “well-positioned in key secular growth markets.” Brad Sills of Bank of America referred to Microsoft as “the leading AI player in applications and infrastructure.” Kash Rangan of Goldman Sachs forecast Microsoft Cloud revenue will surpass $300 billion by fiscal 2029, citing its AI pricing strategy. Dan Ives of Wedbush projected Microsoft will reach a $4 trillion market cap this summer and $5 trillion within 18 months, driven by AI momentum.

Price Action: AMZN stock is trading lower by 0.13% to $223.13 at last check Thursday.

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