Amazon Jumps 5% as Morgan Stanley Names It Top Pick on Faster AWS Growth; Microsoft and Alphabet Edge Higher
Morgan Stanley just put a bold new target on Amazon and called it a top pick, but the reasons behind the upgrade go far beyond the cloud spending story investors already know.
Amazon (NASDAQ:AMZN | AMZN Price Prediction) stock jumped 5% to $262.42 after Morgan Stanley (NYSE:MS) named Amazon a top pick and raised its price target to $350 from $335. Morgan Stanley analyst Brian Nowak maintained an Overweight rating, pointing to faster cloud growth, higher profits, and several AI-related opportunities.
The advance outpaced Microsoft (NASDAQ:MSFT) stock, which gained 1% to $533.78, and Alphabet (NASDAQ:GOOGL) stock, which rose 1% to $345.27. Amazon stock’s stronger move suggests investors found something especially encouraging in the updated outlook.
Faster AWS Growth Leads the Case
Morgan Stanley now expects revenue at Amazon Web Services, Amazon’s cloud business, to increase 47% in 2027 and 42% in 2028. The forecasts represent substantial upgrades from Morgan Stanley’s previous expectations of 41% and 37% growth, respectively.
The revised outlook follows NVIDIA’s (NASDAQ:NVDA) disclosure that Amazon Web Services is expected to purchase and deploy approximately 2 million NVIDIA GPUs across those two years. For Amazon, additional computing capacity could help the cloud business serve more customers building and running AI applications.
That expansion carries a considerable price tag for Amazon. Morgan Stanley increased its Amazon capital-spending forecasts to $355 billion for 2027 and $365 billion for 2028, underscoring how much investment the growth story could require.
Higher Profits Could Support Amazon Stock
Beyond faster revenue growth, Morgan Stanley expects Amazon Web Services operating margins to reach 42% in 2027 and 44% in 2028. Those assumptions support Morgan Stanley’s estimate of approximately $16.50 in Amazon earnings per share for 2028.
Morgan Stanley’s $350 Amazon stock target uses roughly 21 times that projected 2028 earnings figure. The target represents about 33% upside from Amazon stock’s supplied price of $262.42, rather than the approximately 40% upside measured against Friday’s $250 close.
The distinction matters because Amazon stock’s rally has already captured part of the potential gain implied by Morgan Stanley’s target. Morgan Stanley also outlined a $220 bear case and a $410 bull case, illustrating how differently Amazon stock could perform depending on execution and investor expectations.
More Than a Cloud Spending Story
Morgan Stanley identified better visibility into Bedrock, Amazon’s AI model service, as another potential catalyst for Amazon stock. Morgan Stanley also expects Amazon to benefit as AI shopping agents gain traction, with the holiday season offering an early test.
Robotics adds another possible source of improvement within Amazon’s retail operations. Morgan Stanley estimates that every additional 10% of Amazon’s global units moving through robotics-enabled fulfillment centers could generate $2 billion to $4 billion in annual savings, framing robotics as a 2027 catalyst.
Against that backdrop, the Technology Select Sector SPDR ETF (NYSEARCA:XLK) gained 2% to $187.33; for a broad-market gauge, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) rose 0.63% to $768.08. Amazon stock outperformed both benchmarks, although the XLK ETF provides technology-sector context rather than a direct measure of Amazon’s businesses.
Earnings Provide the Next Checkpoint
Amazon will report third-quarter results on Oct. 29 after the closing bell, providing a nearer-term checkpoint for the longer-term thesis. Investors should watch for how Amazon’s cloud growth, capacity spending, and profitability compare with the increasingly ambitious expectations.
The central question is whether Amazon can translate heavy investment into durable revenue growth and stronger earnings. Amazon stock could benefit if operating results validate Morgan Stanley’s outlook, while disappointing returns on spending could leave Amazon stock vulnerable after the rally.
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David Moadel is financial writer specializing in stocks, ETFs, options, precious metals, and Bitcoin. David has written well over 1,000 articles for leading online publications, helping investors understand markets, income strategies, and risk.His work has appeared in The Motley Fool, InvestorPlace, U.S. News & World Report, TipRanks, ValueWalk, Benzinga, Market Realist, TalkMarkets, Finmasters, 24/7 Wall St., and others.With a master’s degree in education, David has taught at the elementary, high school, and college levels. That teaching background shapes his writing style: clear, educational, and practical. David has also built a loyal social-media audience by providing trustworthy financial content on YouTube, X/Twitter, and StockTwits.
