In a recent market report by HG Insights, it was revealed that Amazon’s (NASDAQ:AMZN) AWS continues to dominate the cloud platform landscape, maintaining a commanding market share of just over 50%. Nevertheless, as we enter the era of Gen-AI, a key debate revolves around whether AWS can hold on to its leading cloud position.
According to James Lee, an analyst at Mizuho, the answer to that is a resounding ‘yes.’
“We believe AWS’ strength in data warehousing can sustain given the expected acceleration in workload migration. For Gen-AI specifically, we believe AWS’ marketplace approach is well positioned to resolve 3 key frictions of moving AI workloads including 1) providing model options and diversity, 2) integrating data infrastructure optimized for Gen-AI, and 3) managing computing costs,” Lee opined.
In fact, Lee makes the case that investors are not fully appreciating AWS’ positioning here, based on the strength of its ecosystem and marketplace approach for Gen-AI.
The next “super cycle of cloud migration,” will be driven by Gen-AI with the possibility adoption will accelerate from 20% of workloads currently on the cloud to 70% in just 5 years, much faster than the previous forecast of 10 years. Due to its strength in data warehousing and solutions, AWS is “well positioned to benefit.”
According to Lee’s checks, a significant migration of large-scale workloads has been taking place beneath the surface of extensive cost optimization efforts in recent quarters. “As cost reduction starts to unwind,” says Lee, “we should see new workloads becoming productive to overall revenue growth.”
Moreover, AWS sets itself apart by delivering the most effective solution to tackle the elevated expenses associated with database upgrades and model training. As such, Lee anticipates new deals will pick up this year, further supporting “revenue acceleration” in FY24. “We expect AWS revenue growth continue to recover and accelerate to 20% in FY24E,” the analyst summed up.
Down to business, what does this all mean for investors? Lee maintained a Buy rating on Amazon shares, backed by a $220 price target. Possible gains of 49% could be heading investors’ way should that target be met over the next 12 months. (To watch Lee’s track record, click here)
Lee gets the backing of all of his colleagues here. Based on Buys only – 42, in total – the stock claims a Strong Buy consensus rating. Going by the $183.28 average target, a year from now, shares will be changing hands for a 24% premium. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
