Amazon Shares Gain 2.24%, Analysts See Potential in New AI Developments

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Evercore ISI Analyst believes Amazon’s Stock is Undervalued, Citing Company’s Strong Position in AI

Investors are potentially overlooking the significant benefits that artificial intelligence will provide to Amazon, according to Evercore ISI. The megacap company’s stock closed at $208.36 on Wednesday, marking a 2.24% surge. Analyst Mark Mahaney has designated Amazon as his new top large-cap pick, citing the stock’s attractive valuation following its recent decline. He repositioned Amazon to the leading spot, subsequently moving Uber to the second position.

Mahaney explained that while “shares traded off on the Q4 print,” he considered it an “Expectations Correction” rather than a “Fundamentals correction.” He also emphasized the focus on two upcoming product launches, Alexa+ and Kuiper, and believed there was potential for a “material narrative shift” for Amazon, portraying it as a strong thematic play on robotization and AI Cloud services. He further suggested that generative AI workloads could accelerate AWS revenue in the second half of 2025.

Amazon shares have underperformed this year, experiencing a decline of more than 5%, mirroring the trend among the Magnificent Seven stocks. Investor optimism in hyperscalers has waned due to high valuations and increased competition fears following DeepSeek’s release.

Despite the analyst’s $210 price target representing only a slight increase from Wednesday’s closing price of $208.36, and Amazon’s disappointing guidance for the current quarter in its February 6 earnings report, which resulted in a more than 12% stock drop, Mahaney remains optimistic about large-cap internet companies.

He attributed his continued belief to three factors: the emergence of a “Return on Artificial Intelligence” story, robust demand trends among internet companies, and ongoing cost-cutting efforts that will enhance margins. He noted that “the substantial number of successful AI deployment datapoints” indicates that the ROAI is proving effective.

Specifically, in Amazon’s case, he highlighted that its Amazon Web Services’ AI business has achieved a multi-billion dollar revenue run rate and is growing three times faster than its Cloud business at the same stage. He also pointed to AI-driven automation improving cost to serve in its distribution sector.