Amazon Gains on Morgan Stanley AWS Upgrade

The upgrade is not just about a higher target. Analyst Brian Nowak now expects AWS revenue growth to reach 47% in 2027 and 42% in 2028, up from prior forecasts of 41% and 37%. That optimism follows Nvidia’s disclosure that AWS is expected to buy and deploy roughly 2 million GPUs over those two years. In plain English, Amazon is positioning itself to be one of the biggest infrastructure landlords in the AI economy.

That is why investors bid up Amazon more than Microsoft or Alphabet, which each rose only about 1% on the day. The market is rewarding Amazon for having a clearer near-term catalyst tied to AI capacity and cloud demand, rather than just the broad idea that AI will help all the large tech platforms. For long-term investors, the key question is not whether Amazon can spend more — it clearly can — but whether those dollars translate into enough incremental cloud revenue and profit to justify the outlay.

Morgan Stanley thinks they will. It raised its capital-spending forecasts for Amazon to $355 billion in 2027 and $365 billion in 2028, underscoring how expensive the next leg of growth could be. But heavy investment is not a flaw if it fuels a stronger moat. AWS already posted 37% sales growth in the second quarter, according to Amazon’s latest filing, and a bigger installed base of GPUs could help attract enterprises building and running AI applications.

The other underappreciated piece is robotics. Morgan Stanley sees 2027 as a catalyst year there too, estimating that every additional 10% of fulfillment units processed through automation could save Amazon $2 billion to $4 billion annually. That is the kind of operating leverage investors should care about: a business that can scale revenue while steadily squeezing costs out of one of the world’s largest logistics networks.

There are risks, of course. The same aggressive AI buildout that could widen Amazon’s advantage also ties up enormous amounts of capital, and returns will depend on cloud demand staying hot. Higher rates still matter at the margin because they affect the value investors place on future earnings, while competition from Microsoft Azure and Google Cloud remains intense. Even so, Amazon’s combination of scale, distribution, and AWS strength gives it something most companies lack: multiple ways to compound earnings over time.

For investors thinking in years, not days, Morgan Stanley’s call is a reminder that Amazon’s next chapter may be less about retail and more about infrastructure, automation and AI. If AWS keeps accelerating and robotics starts cutting costs, today’s rally could look like an early move in a much bigger re-rating.