TLDR
- Wells Fargo upgraded Amazon to Overweight from Equal Weight with a $280 price target, up from $245
- AWS revenue growth expected to accelerate to 22% in 2026, four points above consensus estimates
- Project Rainier AI supercomputer using Trainium chips could generate $14 billion in annual revenue at full capacity
- Amazon shares rose 2% in premarket trading following the upgrade announcement
- AWS and SAP announced plans for SAP Sovereign Cloud on AWS European Sovereign Cloud with €7.8 billion investment
Amazon shares jumped 2% in premarket trading Wednesday after Wells Fargo upgraded the e-commerce giant. The investment bank moved its rating to Overweight from Equal Weight.
Wells Fargo also bumped up its price target to $280 from $245. The upgrade came as analysts see revenue acceleration ahead for Amazon Web Services.
The firm expects AWS sales to climb 22% in 2026. That’s four percentage points higher than the consensus estimate of 19%.
Amazon became the top-trending stock on Stocktwits following the news. Retail investor sentiment shifted to “extremely bullish” from “bullish” territory.
Project Rainier sits at the heart of Wells Fargo’s bullish thesis. This AI supercomputer project uses Amazon’s homegrown Trainium chips.
The first 1.3 gigawatts of computing capacity should come online in January at Amazon’s Indiana data center. An additional 0.9 gigawatts will ramp up later.
Wells Fargo estimates the site could generate $14 billion in annual revenue at full capacity. AI startup Anthropic, backed by Amazon’s $4 billion investment, will use the chip cluster.
AWS Market Share Concerns
Amazon Web Services has lost cloud computing market share this year. Wells Fargo projects AWS’s share could drop to 32% by 2029 from 47% in 2024.
But analysts see this as industry growth rather than Amazon weakness. “While share losses remain material, we take solace in stronger industry growth,” wrote Wells Fargo’s Ken Gawrelski.
The firm believes share losses will peak in 2025. After that, revenue acceleration should help reverse Amazon’s stock underperformance.
Amazon shares have gained just 1% this year. That makes it the worst performer in the Magnificent Seven group of tech stocks.
The company jumped over 14% in the past 12 months though. Wednesday’s premarket gains pushed shares to $223.50.
European Cloud Expansion
AWS announced plans to make SAP Sovereign Cloud available on its European platform. Amazon will invest €7.8 billion ($9.2 billion) in this new independent cloud for Europe.
The partnership with SAP expands Amazon’s presence in the European market. It comes as cloud providers face increasing regulatory scrutiny overseas.
Meanwhile, Amazon faces legal challenges at home. The Federal Trade Commission trial began Tuesday over Prime membership practices.
FTC attorneys argue Amazon knew millions of customers signed up for Prime unintentionally. They claim Amazon didn’t stop this because it would hurt revenue.
Most Wall Street analysts remain bullish on Amazon. Of 71 analysts polled by FactSet, 68 rate the stock a Buy or equivalent.
The average price target stands at $264. Wells Fargo’s new $280 target sits above that consensus view.
Wells Fargo says it has “increased conviction” in the AWS growth story. The firm sees Amazon as a solid bet despite ongoing challenges.
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