Amazon's Proprietary Silicon Strategy May Boost AWS Growth and Performance, Analyst Predicts

Piper Sandler analyst Thomas Champion maintains Amazon.com Inc AMZN with an Overweight, raising the price target from $130 to $150.

AI assumed greater importance following the recent Nvidia Corp NVDA print. Nvidia's calendar 2Q23 revenue guide reflected Data Center demand from CSPs (Cloud IaaS), enterprises, and startups.

While there are puts & takes on AWS's AI capabilities, a revenue growth trough seems near. 

The NVDA print arguably represents a historic demand shift toward AI computing with a seemingly long runway for growth. 

Alphabet Inc GOOG GOOGL Google searches & Reddit data show strong interest in AWS AI offerings. 

Less favorable, Snowflake Inc SNOW earnings show optimizations continue. As for timing, SNOW reflects enterprise optimizations now, while the NVDA guide looks like the future. 

AWS is still purchasing the latest GPUs. But they also spent years investing in their chips. AWS could implement a defensible proprietary silicon strategy to serve their needs better.

While optimizations may persist near term, 3Q represents a year since the "optimization" cycle began. Backlog growth held steady in 1Q. The analyst modestly raised his 2024E AWS revenue estimates & made modest tweaks to margins.

Price Action: AMZN shares traded lower by 3.93% at $121.69 on the last check Wednesday.

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