Morgan Stanley has promoted Amazon to its Top Pick, arguing that the company is positioned to both advance and profit from the next phase of generative AI-driven change. Analyst Brian Nowak framed his endorsement around two specific catalysts he believes could prompt a meaningful re-rating of the shares.
Nowak opens by addressing investor concern about returns on AI-related capital spending, saying he remains bullish "through this uncertainty" and pointing to indicators he views as supportive of sustained AWS growth.
AWS growth durability and capacity limits
The first catalyst centers on what Nowak describes as AWS growth durability. He believes demand for AWS is strong and that current backlog trends support more than 30% growth "for quite some time." However, he cautions that the present slope of acceleration is being tempered by capacity constraints tied to data center openings.
To quantify returns, Nowak uses a "capex yield analysis," which measures incremental revenue as a percentage of the previous year's capital spending. In his base case, that yield sits roughly 50% below the long-term average, a gap that he interprets as upside risk for AWS revenue if data center openings eventually align with the pace of spending.
Nowak lays out a sensitivity: every 5% improvement in yield would add roughly 130 basis points to AWS growth, and a move to about $0.45 in yield could drive mid-30% year-over-year AWS growth. "As AWS opens more data centers, this 'yield' should improve and AWS should continue to accelerate," he wrote.
Agentic commerce as a growth vector
The second catalyst Nowak highlights is the emergence of agentic commerce. He points to Amazon's expanding last-mile inventory footprint, infrastructure investments and technology deployment as positioning the company to lead in both vertical and horizontal agentic shopping.
Nowak notes that Amazon's platform-specific agent, Rufus, is already contributing 140 basis points to fourth-quarter 2025 gross merchandise value (GMV) growth. On the topic of horizontal AI agents, he cites the company's own acknowledgement of the need to "collectively figure out a better customer experience" and that "we continue to have a number of conversations," language Nowak reads as indicative of potential partnership activity ahead.
He adds, "We look for AMZN horizontal agentic partnerships to emerge, which will make investors feel more confident in AMZN’s long-term positioning."
Valuation and firm view
Nowak observes that Amazon shares currently trade at roughly 19x the firm's 2027 GAAP EPS estimate, which is consistent with about 20% forward EPS growth. On a PEG basis, Morgan Stanley views that multiple as representing roughly a 40% discount to peers.
The firm reiterated its Overweight rating on Amazon and maintained a $300 price target, which the firm says implies about 50% upside from recent levels.
Implications
Nowak's framework ties the pace of revenue acceleration to physical capacity and to the commercial adoption of AI agents across retail channels. Under this view, both cloud infrastructure - and the retail delivery and logistics ecosystem that supports agentic commerce - are the economic touchpoints most likely to determine how quickly investors re-rate Amazon's growth profile.
Bottom line
Morgan Stanley's assessment frames Amazon as an under-appreciated GenAI winner, with AWS capacity expansion and the rollout of agentic commerce technologies presented as the primary paths toward a potential re-rating. The firm keeps an Overweight stance and a $300 target while recognizing the uncertainty around capital returns and partnership development.