TLDR:
- Amazon’s stock has rallied nearly 30% since April lows but still presents buying opportunity
- AWS cloud computing remains Amazon’s fastest-growing and most profitable segment
- Recent US-China tariff reduction from 145% to 30% eases pressure on Amazon’s e-commerce business
- AI implementation is improving operational efficiency and margins across the company
- Analysts are setting price targets as high as $305, suggesting significant upside potential
Amazon’s stock has been on an impressive upward trajectory, climbing almost 30% from its April lows to settle just above $205 per share. Despite this rally, financial analysts argue that May might be the last month for investors to purchase the stock at what they consider a discount price, with some setting price targets as high as $305.
The e-commerce giant, with a market capitalization exceeding $2 trillion, continues to show strength across its business segments. Though its share price has declined year-to-date, many market watchers view this as a temporary setback and an attractive entry point.
What’s driving this optimism? Amazon Web Services (AWS), the company’s cloud computing division, remains its star performer. Despite being less visible to consumers than its retail operations, AWS generated $29.3 billion in revenue last quarter, representing a 17% increase. Even more impressive, its operating income grew 22% to $11.5 billion.
AWS maintains approximately 30% market share in the global cloud computing space. The division’s growth is being fueled by customers building and deploying AI models through services like Bedrock and SageMaker.
Amazon, Microsoft and Google collectively control ~63% of the global cloud infrastructure market.$AMZN AWS: 30%$MSFT Azure: 21%$GOOGL GCP: 12%
Cloud is projected to grow 18.3%+ annually over the next 5 years.
If these 3 giants simply hold their share, their cloud revenue… pic.twitter.com/zp417u2rlB
— Monopoly Capital 💸 (@mply_cap) May 20, 2025
AI-Powered Efficiency Gains
Amazon’s strategic investment in artificial intelligence extends beyond AWS. The company has developed its own specialized AI chips through subsidiary Annapurna Labs. Its Trainium chip optimizes training large language models, while the Inferentia chip handles inference tasks. These custom chips deliver better performance for specific tasks while consuming less power.
On the e-commerce side, Amazon is leveraging AI to create operational efficiencies. AI-powered robots in fulfillment centers handle tasks like lifting heavy objects, sorting packages, and identifying damaged goods. This automation reduces errors and cuts costs.
The company also uses AI to optimize delivery routes in its logistics network. These optimizations enable drivers to deliver items more quickly while reducing fuel consumption. AI is even helping boost Amazon’s high-margin advertising business by improving ad targeting and campaign performance.
These efficiency improvements are showing up in the financial results. In the first quarter, North America’s operating income increased by 16% despite revenue growing only 8%, demonstrating strong operating leverage.
Trade Tensions Easing
Recent developments in US-China trade relations have provided another tailwind for Amazon. The United States has agreed to reduce Chinese tariffs from 145% to 30% over the next 90 days as the two countries negotiate a broader trade agreement.
This reduction eases pressure on Amazon’s e-commerce business, which relies heavily on products manufactured in China. Higher tariffs typically lead to higher prices or compressed margins if Amazon absorbs the costs.
Interestingly, the so-called “de minimis” tariff was maintained (though reduced), which actually benefits Amazon by primarily impacting Chinese competitors like Temu and Shein that sell directly to US customers.
Few large-cap companies are as directly exposed to trade policy as Amazon. Tariffs on Chinese imports raise costs across its vast e-commerce ecosystem, affecting both Amazon’s retail operations and the network of third-party sellers who now account for roughly 60% of sales on its platform.
Relocating manufacturing operations away from China isn’t a quick solution either. Analysts consistently note that such transitions are lengthy and expensive, which is why tariff relief has such a large impact on sentiment and future margin expectations.
With trade tensions easing, Amazon gains a near-term margin boost and longer-term stability. This development has removed one of the biggest concerns weighing on the stock.
The technical indicators also support a continued rally. Amazon’s stock is trading above both its 50-day and 200-day moving averages, with increasing trading volume on up days. The relative strength index sits around 60 – elevated but not yet in overbought territory.
The broader market environment appears supportive as well. The S&P 500 has been recovering from its early-year decline, and investors are returning to growth stocks with proven earnings power.
While Amazon has made significant gains from its recent lows, analysts argue that this isn’t merely a short-term bounce. Rather, it represents a fundamentally supported surge backed by margin expansion, improving macroeconomic conditions, and growing analyst conviction.
If current tailwinds persist, May could indeed represent the final opportunity for investors to acquire shares near the $200 level. Amazon closed at $205.97 as of May 19, 2025, with a market cap of $2.2 trillion.
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