Amazon Web Services is trailing Microsoft's Azure and Alphabet's Google Cloud in providing generative artificial intelligence services, but it looks to be a quick study. A Wall Street analyst on Thursday raised his price target on Amazon stock on improving prospects for AWS in generative AI.
UBS analyst Lloyd Walmsley reiterated his buy rating on Amazon stock and hiked his price target to 150 from 130. In a note to clients, he said the company's cloud computing business, Amazon Web Services, is "late to the game" in generative AI but will not be left behind.
On the stock market today, Amazon stock climbed 2.5% to close at 124.25.
Generative AI can create content, including written articles, images, videos and music, from simple descriptive phrases. Artificial intelligence systems analyze and digest vast amounts of data to create new works. Generative AI also can write computer programming code.
Amazon Stock News: Bedrock To Drive AWS Growth
Microsoft kicked off the generative AI trend this year with its investment in OpenAI, creator of ChatGPT and DALL-E applications. Google soon followed with its Bard service.
Generative AI could start showing up in AWS results by the fourth quarter, Walmsley said. Meanwhile, the company's Bedrock initiative is fueling its generative AI efforts.
Amazon Bedrock is a service for building generative AI applications on Amazon's cloud computing platform. Further, it offers a range of foundation models from Amazon and leading AI startups. Amazon announced Bedrock on April 13.
Amazon should benefit from its incumbency status in cloud computing as well as the potential commoditization of large language models used in generative AI, Walmsley said.
"We see room for Amazon shares to move higher as AWS reaccelerates in the fourth quarter as Bedrock expands," Walmsley said.
"Amazon will benefit from incumbency status because enterprises are already trained on AWS and store data with the company," Walmsley said. "And using Amazon's generative AI products will help companies move up to higher commitment thresholds and thereby secure better discounts."
Bernstein Criticizes Amazon Performance
Amazon stock fell 4.3% on Wednesday after investment bank Bernstein published an open letter to Amazon Chief Executive Andy Jassy that criticized the company's performance.
Bernstein analysts said Amazon is too unfocused and is missing out on opportunities in its core businesses, according to CNBC. Its core businesses include e-commerce and cloud computing.
Amazon stock has significantly underperformed its Big Tech peers this year, including Apple, Google and Microsoft.
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