Amazon’s Cloud and AI Offensive Puts $200 Billion Capex Under the Microscope

With Amazon set to report first-quarter earnings on April 29, the stakes could hardly be higher. The company has spent the days leading up to the release cementing its position as the dominant force in artificial intelligence infrastructure, signing a blockbuster expansion of its partnership with Anthropic that could ultimately be worth $25 billion. Wall Street, in turn, has responded with a flurry of price-target upgrades, even as investors keep a wary eye on the enormous capital spending required to sustain this ambition.

The Anthropic Deal and Its Cloud-First Logic

Amazon has deepened its bet on the AI startup by injecting an additional $5 billion into Anthropic, bringing the total potential commitment to $25 billion. The structure of the deal is telling: Anthropic, now valued at $350 billion, has agreed to spend a nine-figure sum on Amazon Web Services over the next decade. In exchange, it will use Amazon’s custom Trainium chips, while AWS customers gain direct access to Anthropic’s Claude models.

The arrangement reflects a broader strategy. Rather than simply investing for equity returns, Amazon is locking in long-term cloud revenue that directly feeds its most profitable division. UBS analysts estimate that partnerships with both OpenAI and Anthropic have added roughly $200 billion to AWS’s order backlog. That helps explain why UBS lifted its price target to $304, forecasting AWS revenue growth of 38% this year — well above the consensus estimate of 26%.

Analyst Targets Stack Up

The upgrade cycle has been unusually broad. KeyBanc raised its target from $285 to $325, while Sanford C. Bernstein moved from $265 to $300 and Arete Research from $285 to $301. Bank of America chimed in with a $298 target, projecting AWS growth of 28%. BMO Capital Markets went a step further, naming Amazon its “Top Pick” and setting a $315 target, citing resilience in the advertising business despite macroeconomic headwinds in retail — buoyed by upcoming events such as the Olympics and the FIFA World Cup.

Of the 68 analysts covering Amazon, 63 now rate the stock a buy, with just five recommending a hold. The implied upside from Arete’s target alone stood at 18% from the stock’s level at the time of the upgrade.

AI Revenue Takes Shape

The numbers behind the narrative are becoming concrete. UBS analyst Stephen Ju estimates that Amazon’s annualized recurring AI revenue has already surpassed $15 billion. AWS chief Andy Jassy confirmed in early April that the AI segment’s annualized run rate had crossed that threshold. The Anthropic partnership — with investment pledges of up to $25 billion — is seen as the primary lever, though it also brings higher capital expenditures.

Those costs are substantial. Amazon’s 2026 capital spending budget of $200 billion triggered a sell-off earlier this year, and investors are now watching closely to see when those outlays translate into measurable profit growth. The company has guided for operating income of up to $21.5 billion in the first quarter, and any miss on that front could derail the stock’s recent rally.

Stock Near Highs, Valuation Below Historical Average

The shares are trading in Frankfurt at €220.10, just shy of their 52-week high and roughly 34% above the level of a year ago. The stock has gained about 22% in the past month alone. Yet the valuation appears relatively restrained: the forward price-to-earnings multiple of 35.6 sits well below the five-year average of 53.3.

One note of caution comes from insider activity. CEO Andy Jassy sold 31,000 shares under a pre-arranged trading plan, and total insider sales over the past three months have reached roughly $28 million. While such moves are often routine, they tend to draw scrutiny when valuations are elevated.

Operational Headwinds and Tariff Pressures

Beyond the AI narrative, Amazon faces real operational friction. Management is currently negotiating price adjustments with third-party sellers to account for new US import tariffs on Chinese goods and the elimination of de minimis exemptions for low-value shipments. These cost pressures are rippling through the e-commerce platform and could weigh on margins.

Still, the market has largely looked past these risks. The April 29 earnings report will provide the first hard evidence of whether AWS growth can sustain the ambitious forecasts — and whether the billions poured into AI are beginning to show up in the bottom line.

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Amazon Stock: New Analysis - 24 April

Fresh Amazon information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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Amazon Stock: New Analysis - 24 April

Fresh Amazon information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated Amazon analysis...