Amazon Web Services (AWS) recently announced a major initiative to build and deploy systems specifically for artificial intelligence and high-performance computing for the U.S. government—a first for the company. It has committed up to $50 billion to strengthen its AI and supercomputing capabilities for U.S. federal government customers. This investment, expected to commence in 2026, will involve constructing data centers across several of its high-security cloud regions using advanced technologies, adding nearly 1.3 gigawatts of AI and supercomputing capacity.
However, despite AWS’s revenue growth rebounding to 20% last quarter, investors are still waiting for clear evidence that the cloud services division has fully overcome its capacity bottlenecks. The stock performance of Amazon (AMZN) has been relatively weak, with a gain of less than 6% so far in 2025, significantly lagging behind the ETF tracking the “Magnificent Seven” sector. Since the end of 2020, its stock price increase has also consistently underperformed the S&P 500 Index. Market views suggest that to break free from such cyclical volatility, Amazon must demonstrate tangible improvements in several key areas.
In the wave of artificial intelligence, Amazon was once seen as a laggard, partly due to market perceptions of its sluggish cloud business growth. Even with the recent rebound in revenue growth, AWS is still considered to be trailing behind its competitors. As a core driver of Amazon’s stock price, AWS experienced growth constraints early in 2025 due to its inability to quickly meet surging AI demand. Although management has announced ambitious capacity expansion plans, investor confidence still requires sustained revenue growth to solidify.
Analysts point out that Amazon still has work to do in boosting its AI capacity. Over the past year, AWS has continued to increase its cloud capacity and plans further expansion. Since the beginning of this year, the business has achieved a series of milestones: key data center projects have gone live, a major deal with OpenAI was secured, and a new generation of custom chips was released. Market observers believe that the potential collaboration with OpenAI strengthens AWS’s position in the AI infrastructure space. If its custom chips are adopted by OpenAI, it would be a significant endorsement of Amazon’s technological capabilities. Some analyses predict that, thanks to custom chips and new partnerships, AWS’s growth rate is expected to improve in the future.
Beyond AWS, Amazon’s high-margin advertising business is also a focal point for investors and has become one of the main growth drivers in recent years. Analysts note that the growing popularity of Prime Video serves as a catalyst for advertising business development, with household penetration already comparable to industry leaders. Advertising revenue is expected to contribute significantly to the company’s overall profits.
At the same time, Amazon still needs to prove its resilience in its core e-commerce segment. Against a backdrop of inflationary pressures on consumers, the performance of the upcoming holiday sales season is crucial. Analysts anticipate that Amazon may gain market share during key promotional periods. The company disclosed in the third quarter that its “everyday essentials” category is growing rapidly, and it continues to invest in logistics, delivery, and cost-saving measures aimed at improving retail business margins. The increasing focus on grocery delivery also provides a potential opportunity to boost the e-commerce business.
