Amazon’s OpenAI Pact Powers Fresh Momentum For AWS
It's all about unlocking the vibe
A new frontier for Amazon’s cloud
Amazon has turned up the volume on its artificial intelligence ambitions. A new multi-year partnership with OpenAI will see Amazon Web Services (AWS) supply the ChatGPT maker with computing power and infrastructure worth a reported $38 billion, a deal Wedbush says “further unlocks a positive vibe” around Amazon’s cloud unit.
The agreement, announced on Monday, means OpenAI will begin running its AI models on Amazon’s EC2 UltraServers, expanding over the next seven years as Amazon builds dedicated facilities for the company.
Wedbush analysts led by Scott Devitt and Dan Ives view the deal as strategically important, building on Amazon’s existing alliance with Anthropic and cementing AWS as a key player in the race to host generative AI workloads.
AWS growth back on the front foot
After several muted quarters, AWS is regaining momentum. The division’s revenue growth hit 20.2% year on year in the third quarter, its fastest pace since late 2022, and outpaced forecasts by more than two percentage points.
Wedbush highlights a clear pick-up in demand for both AI and core cloud services, helped by a surge in capital spending and energy capacity. Over the past year AWS has added 3.8 gigawatts of power and doubled its infrastructure footprint since 2022, with plans to double it again by 2027.
The broker sees this expansion translating into stronger results ahead. Backlog growth and a higher 2025 capex plan point to sustained demand.
“Momentum will continue for the segment,” the analysts write, noting that AWS’s two-year stacked growth has accelerated for five consecutive quarters.
Valuation gap closing, but room remains
Wedbush argues that investors have been underpricing AWS’s contribution to Amazon’s overall value.
In its sum-of-the-parts analysis, AWS accounts for roughly 44% of Amazon’s implied enterprise value, despite its superior margins and growth. The firm expects AWS to deliver 16% operating margins by 2027 and sees scope for further re-rating as capacity constraints ease.
At $256 a share, Amazon trades on 26 times the firm’s 2027 earnings forecast. Wedbush calls that “an attractive entry point,” raising its 12-month target to $340 from $330 and keeping an Outperform rating.
AI strategy gathers critical mass
The OpenAI tie-up is as much about positioning as revenue. Wedbush says Amazon’s deepening presence across the AI stack, from chips and data centres to software and infrastructure, strengthens its competitive moat against Microsoft’s Azure and Google Cloud. Combined with resilient advertising and retail operations, the analysts believe Amazon’s next leg of growth will again be driven by AWS.
As Ives and his team put it, “The inflexion in AWS growth has alleviated the main overhang on the shares.” With AI now the industry’s defining theme, Amazon looks ready to remind Wall Street that the cloud still has blue skies ahead.
