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Amazon (AMZN) Stock Upgraded to Overweight on AWS Growth Outlook

Amazon.com, Inc. (NASDAQ:AMZN) is one of the AI Stocks Every Investor Should Watch. On September 24, Wells Fargo analyst Ken Gawrelski upgraded the stock from Equal Weight to Overweight with a price target of $280.00 (from $245.00).

The firm has stronger conviction in AWS revenue acceleration in 2026 driven by Project Rainier capacity additions and peak share losses in 2025.

Gawrelski noted how Project Rainier is a dedicated AWS data center for Anthropic compute in Indiana. It is expected to start coming online in January 2026. His team has estimated that the facility will contribute an estimated $14B annual AWS revenue at full capacity of 2.2GW.

Even though AWS market share will keep declining, growth should pick up pace again as the broader cloud industry expands.

Some risks highlighted by the firm include execution challenges with Rainier, Trainium chip performance, slow core workload demand, and AI-related margin pressure.

“Upgrading AMZN to OW (from EW) on greater conviction in AWS acceleration in ’26. Raising AWS growth to +22% from prior/consensus of +19%/+18%. We see Project Rainier, a significant compute capacity build w/ partner Anthropic, as the primary driver of acceleration, contributing 5%/4% to AWS growth in ’26/’27. See build in our companion cloud industry note. We view AWS revenue acceleration as the key to the reversal of share underperformance YTD (flat vs. NDQ +17%). Increasing our 2026 / 2027 AWS revenue estimates by 3% / 7% as we see Project Rainier capacity additions starting in early 2026 supporting incremental Anthropic compute. Expect Project Rainier Phase 1 (1.3GW) to come online in Jan ’26 w/ 6-month utilization ramp and Phase 2 to start coming online in 4Q26. We estimate Indiana campus at full capacity (2.2GW) contributes ~$14B annual revenues to AWS. We forecast Anthropic contributes 7 points to AWS 2026 revenue growth (vs 3 points in 2025). See AWS market share losses peaking in 2025 (-470bps y/y), improving in 2026 and beyond as AWS accelerates, alleviating competitive concerns. While share losses remain material, we take solace in stronger industry growth and rising AWS estimates. Project AWS share losses modestly improve to -420bps y/y in 2026, -260bps y/y in 2027 and -180bps y/y in 2028. By 2029, see AWS at 32% share, down from 47% in 2024. However, over that period, see cloud industry 31% CAGR to $870B from $230B in 2024. Risks to our call include execution of scaling Project Rainier, performance of Trainium chips, further deceleration of core (non-AI) workloads, and greater AI-related margin headwinds than anticipated. See operational execution of Project Rainier (and data center capacity more broadly) as key risk given ongoing supply constraints and uncertainty around large Trainium deployments. We assume AWS OI margin compression of 270bps / 180bps y/y in 2026 / 2027 tied to scaling AI deployments.”

Amazon.com Inc. (AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions.

While we acknowledge the risk and potential of AMZN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT:  10 AI Stocks on Market Radar and 10 AI Stocks in the Spotlight This Week

Disclosure: None.

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