Amazon (AMZN) stock fell 5.5% on friday following its Q4 earnings, as investors weighed rising competition and heavy capital spending despite modest revenue growth. Adding to the caution, DA Davidson’s five-star-rated analyst Gil Luria downgraded AMZN from Buy to Hold, cutting his price target from $300 to $175. Luria argued that Amazon is “losing the lead” in cloud computing and showing early signs of a strategic disadvantage in the rapidly evolving, AI-driven retail landscape.
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According to Luria, AWS is falling behind competitors like Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud. While AWS grew 24% year over year, Google Cloud surged 48%, and Azure grew 39%, though its growth was limited by capacity.
Luria also noted that Amazon lacks an in-house frontier AI lab like Google’s and doesn’t have a primary partnership with OpenAI like Microsoft, which is shifting some customers away. He added that Amazon is “scrambling to catch up” and is pushing heavier spending, highlighting $200 billion in planned capital expenditures. Luria also noted that Amazon may need to invest $50 billion in OpenAI to remain competitive in advanced AI models.
The downgrade also reflected concerns that Amazon’s retail business is struggling to adapt to a “new chat-driven Internet” dominated by Gemini and ChatGPT.
Overall, he believes that without direct AI integrations, Amazon could face a “structural disadvantage,” meaning that sellers using top AI models might attract more traffic and advertising revenue, leaving Amazon behind.
Is Amazon a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 38 Buys and five Holds assigned in the past three months. Furthermore, the average AMZN price target of $283.43 per share implies 35% upside potential.
