Some big technology companies racked up scores of artificial-intelligence mentions on their latest earnings calls, so by contrast, Amazon.com Inc. has been quieter about its efforts.
There were only 12 mentions of AI on Amazon’s AMZN, +2.49% last earnings call, compared with 65 for Google-parent Alphabet Inc. GOOG, -0.22% GOOGL, -0.29% and 53 for Microsoft Corp. MSFT, +0.58%. But that doesn’t mean Amazon won’t benefit from the AI rush, and, in fact, it could prove a sleepy play, according to one analyst.
“Channel feedback suggests AWS?is better positioned for GenAI than investors appreciate and could drive growth as early as 4Q,” reads the preview for a recent note from UBS analyst Lloyd Walmsley.
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He called Amazon, “[l]ate to the game but not left behind” when it comes to artificial intelligence, adding that he’s now “more sanguine” on the prospects for AWS to benefit from generative AI, or the type of AI that ChatGPT helped burst into the public consciousness.
“While most of AMZN’s products are in test phase right now, we expect all of them to be offered widely before FY23 close,” Walmsley wrote. These include Amazon Bedrock, which makes foundational models for AI available as APIs, or application programming interfaces, as well as Amazon Trainium, which offers lower costs for training models in the cloud.
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His recent conversations in the industry suggest that Amazon “should see an
incumbency benefit as customers are already well-versed with existing AWS and
SageMaker systems.” (SageMaker is a machine-learning service from the company.) Additionally, over the long run, the company’s offerings could be cheaper relative to rivals, “as AWS is known for integration and optimization with previous cloud tech.”
The company has suggested that it would offer discounts to customers that commit to certain usage, according to his recent industry checks. Walmsley thinks the company’s end-to-end expertise will also hold appeal with smaller businesses.
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“On the flipside, channel checks have pointed out that the service is still in its infancy and AWS needs to work on broadening the suite, improving integration with non-gen AI AWS services and tools, and variety of competent FMs [foundational models] available,” he wrote. “We will be looking for updates on pricing to see how the cost compares to Azure and GCP services,” referring to Microsoft’s and Google’s cloud offerings, respectively.
Walmsley’s optimism about Amazon’s AI potential prompted him to lift his price target on the stock to $ 150 from $ 130 in Thursday’s note to clients. He continues to rate the stock a buy.
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