Amazon's Cloud and AI Innovations Bolstered by Nvidia Partnership, Analyst Predicts Growth

JMP Securities analyst Nicholas Jones reiterated a Market Outperform rating on Amazon.Com, Inc AMZN with a price target of $175.

At AWS, re: Invent 2023, Adam Selipsky, CEO of Amazon Web Services, showcased several partnerships and new solutions Amazon creates for AWS users. 

AMZN's focus on generative AI, increasing performance, reducing customer costs, and data privacy and security were key themes during the event. 

While the generative AI-wars between significant cloud providers are likely only heating up, Jones noted AMZN's constant focus on reducing costs and improving efficiency and speed as key competitive advantages likely to manifest in share gains over time. 

Jones sees AMZN as a dominant player within the cloud and a formidable competitor within generative AI. From here, he expects investors to remain focused on AWS' growth in 4Q23 and its implied trajectory in 2024. 

AWS continues to innovate and develop leading technology down to the silicone level. Jones noted that faster chips will increase the efficiency and help reduce costs of AWS customers, ultimately building on its dominant position in the cloud ecosystem.

Jones noted that Nvidia Corp NVDA software on AWS will boost Generative AI development for custom models, semantic retrieval, and drug discovery for healthcare customers. The partnership should enable the adoption of Generative AI solutions across many industries in a secure and scalable fashion.

Agents for Bedrock's general availability will allow companies to create higher levels of automation while maintaining the privacy and security of their data, which we view as a critical hurdle for broader adoption.

Amazon Q creates a tailored solution for businesses to leverage AI in various ways, including improving efficiency and productivity by helping employees get fast, relevant answers, generate content, and take action. Additionally, Amazon Q with Amazon Connect should help improve companies' customer service experiences. Ultimately, internal efficiencies have been a significant use case for generative AI, which Amazon Q should help drive.

Price Action: AMZN shares are trading lower by 0.36% at $148.50 on the last check Wednesday.