UBS Forecasts Upside Potential for Amazon Shares

UBS Raises Price Target on Amazon, Expects Growth in Generative AI at AWS

In a note issued on Thursday, UBS analysts announced an increase in the firm’s price target on Buy-rated Amazon (NASDAQ: AMZN) from $130 to $150. The analysts provided insights into the potential impact of generative artificial intelligence (AI) at Amazon Web Services (AWS), stating that it could be introduced as early as the fourth quarter.

The analysts expressed their positive outlook, indicating that there is room for Amazon’s shares to move higher as AWS reaccelerates in the fourth quarter with the expansion of Bedrock, an internal project at Amazon. The analysts referred to the company’s AI day held on May 24th, combined with other feedback from various sources, which has increased their confidence in AWS prospects in the field of generative AI.

According to UBS, the increasing demand for compute power, especially as Bedrock expands later this year, is expected to drive acceleration in the fourth quarter, leading them to raise their projections for Amazon’s performance during that period.

The UBS analysts also highlighted the potential benefits that Amazon could derive from its incumbency status and the potential commoditization of large language models (LLMs). While AWS may be perceived as lagging behind in LLMs, UBS’s research suggests that functional models (FMs) could be commoditized, which would ultimately benefit AWS. The analysts cited channel contacts who anticipate AWS catching up swiftly in LLMs and AI-focused chips, areas that are expected to experience significant demand despite global shortages.

The analysts’ positive outlook on Amazon’s future prospects is driven by their belief in the growth potential of AWS and the opportunities presented by the development and integration of generative AI technologies within the platform.

Generative AI at AWS: Expanding Possibilities

The mention of generative AI at AWS reflects the potential for significant advancements in artificial intelligence capabilities within the cloud computing space. Generative AI refers to the ability of AI systems to generate new, original content, such as images, videos, or even text, based on the patterns and information they have learned from existing data.

By integrating generative AI technologies into AWS, Amazon aims to unlock new possibilities and enhance its services for customers. This advancement could have profound implications across various industries, including media, entertainment, advertising, and more.

The UBS analysts’ optimism stems from their assessment that generative AI capabilities will be introduced at AWS as early as the fourth quarter. This development could mark a significant milestone for Amazon, as it would enable the company to offer cutting-edge AI capabilities to its customers and potentially drive increased adoption of AWS services.

Bedrock Expansion and Compute Demand

The UBS analysts also emphasized the anticipated expansion of Bedrock, an internal project at Amazon, as a key driver for the acceleration of AWS in the fourth quarter. While specific details about Bedrock remain undisclosed, the analysts’ reference to its expansion suggests that Amazon is strategically investing in infrastructure and technologies to support the growing demands of its cloud computing business.

The increasing compute demand, particularly in relation to Bedrock’s expansion, is expected to fuel AWS growth in the fourth quarter and beyond. As businesses and organizations continue to leverage cloud computing for various applications and workloads, the demand for scalable and reliable computing resources is on the rise. By addressing this demand through the expansion of Bedrock, Amazon is positioning itself to capture a larger share of the cloud computing market and further solidify AWS as a leading provider in the industry.

Incumbency Status and Commoditization of LLMs

UBS analysts highlighted Amazon’s incumbency status as a competitive advantage in the cloud computing market. Incumbency refers to the established position and customer base that Amazon has built over the years through its AWS offerings. This incumbent