Amazon pops as Loop Capital says AWS slowdown likely to 'bottom' soon
hapabapa
Amazon (NASDAQ:AMZN) shares rose more than 4% on Thursday as investment firm Loop Capital said the slowdown in its cloud computing unit is likely to "bottom" in short order.
"We think [Amazon Web Services] revenue deceleration will bottom in the next 2-quarters and think [generative AI] preparedness will accelerate the recovery," analyst Rob Sanderson wrote in an investor note.
Sanderson pointed out that the cost optimization efforts from Amazon's (AMZN) cloud customers started around August 2022 and it's looking increasingly like that process is starting to end, with AWS eventually set to return to growth. 
"While there is debate over timing and competitive position of the major clouds for gen-AI, we think what is not debatable is that gen-AI will drive significant demand for cloud workloads," Sanderson added, pointing out that generative AI is starting to "bend the curve" for cloud spending costs this year.
In addition, Sanderson said that while the timing of the slowdown in AWS revenue is likely to be the next driver of the stock, the continued recovery of unit economics is likely to be a bigger factor for the company's earnings power. 
During the COVID-19 pandemic, Amazon (AMZN) saw 670 basis points of deleverage for the retail segment's margins via "challenging operating conditions and cost inflation." This is now starting to reverse, as energy prices, transportation other costs start to normalize, Sanderson explained. The company also changed its fulfillment network, moving to eight regional interconnects, compared to one previously. 
As such, the average distance that products travel are now 15% less and there are 12% fewer human touches since the initiative was first rolled out in the first quarter, Sanderson added.
Separately on Thursday, AWS CEO Adam Selipsky appeared at Bloomberg's Technology Summit and said that no one company would have a single AI solution for their customers and that the unit is taking a longer-term view concerning AI.
More on Amazon

Amazon is sued by FTC over 'deceptive' practices with Prime sign-ups and cancellations 
Amazon: Still Formidable On Fundamentals
Amazon likely to see AI benefits, EBITDA upside, Jefferies says