There’s one stock Wall Street will never say sell.
That stock is Amazon. And the conviction behind it has barely budged in years.
Currently, more than 80 analysts cover the company. Roughly 95 per cent rate it a buy. Not one rates it a sell. And based on the average one-year target price, those analysts would not be surprised to see the shares climb at least 20 per cent. So what’s behind the conviction?
Well, it starts with the fact that Amazon has delivered for investors over the long term.
In the past two decades, the stock has returned roughly 15,000 per cent, placing it among the top five performers in the Nasdaq 100. Only a handful of names in the entire index have done better.
But another factor is the company’s continual reinvention, which often unlocks new growth for the business.
My Ticker Take co-host Caroline Lesley and I recently spent a day inside Annapurna Labs, the Amazon facility in Austin, Texas where the company designs the custom chips that now power some of the biggest names in artificial intelligence, including Anthropic, OpenAI and Apple. The full deep dive is on Ticker Take. But the trip gave us something every analyst on the stock would envy: a first-hand look at what Amazon is actually building.
What we saw helps explain why Wall Street loves the stock. It also surfaces a couple of risks worth taking seriously.
The business
Amazon is on track for roughly US$825 billion in revenue this year. About a fifth of that, somewhere north of US$168 billion, will come from Amazon Web Services, the company’s cloud business.
The catch is that AWS isn’t just a fifth of revenue. It’s more than half of profit. AWS operating income is expected to clear US$59 billion this year, with operating margins close to 35 per cent.
In other words, the cloud is where Amazon makes its money. By comparison, the retail business, which most people still think of as Amazon, is a much lower-margin operation.
Now, look forward five years. Analysts expect AWS revenue to nearly triple to around US$463 billion, or close to a third of total company revenue. Operating income could clear US$185 billion. Margins could climb into the high 30s.
If those numbers are anywhere close to right, AWS will be one of the largest and most profitable businesses on the planet.
The chips
Which is where the Austin trip mattered.
What’s driving AWS forward isn’t just demand from new AI customers. It’s the chips Amazon now designs in-house. Graviton, the company’s CPU. Nitro, the chip that runs the internals of the cloud. And Trainium, the AI chip designed to compete with Nvidia.
Amazon’s custom chip business is already running at more than US$20 billion a year, growing at triple-digit rates. CEO Andy Jassy described it in his most recent shareholder letter as a business that’s “on fire.” The reason it matters for shareholders is straightforward. Every chip Amazon designs in-house is a chip it doesn’t have to buy from Nvidia. Jassy has said Trainium could save the company tens of billions of dollars in capital spending a year.
The risk
As with all investments, there’s a bear case to consider.
Amazon plans to spend roughly US$200 billion in capital expenditures this year, much of it on data centres and AI infrastructure. That figure has unnerved investors who worry the spending is too aggressive too fast.
The market consensus, at least for now, is that the spending will pay off. The chip business, the cloud growth, and Amazon’s stake in AI leader Anthropic all point in the same direction.
The Ticker Take
Amazon is a must-own name for many top pros. On Ticker Take, we’ve tracked every stock pick our guests have made. Amazon is tied for the third most-recommended in more than 100 episodes, ranking behind only Nvidia and JPMorgan.
As an example, it’s a regular top pick for Wedbush analyst Dan Ives, a frequent Ticker Take guest, who currently believes the shares are worth US$300.
For its next act, Amazon will need to keep delivering in e-commerce and the cloud, while turning its big AI swings into steady profits. Solid execution on that front could keep the bulls onside.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.
