UBS sees further upside for Amazon shares, helped by expansion of AI-aimed Bedrock
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UBS analyst Lloyd Walmsley sees further upside for Amazon (NASDAQ:AMZN) shares this year, helped by an expansion of its foundation model application programming interface Bedrock.
AMZN was last up 2.2% to $123.91 in late afternoon trade on Thursday. Sentiment was helped by Wells Fargo starting coverage on the stock with an Overweight rating. 
Amazon's (AMZN) cloud computing unit Amazon Web Services (AWS) in April unveiled a new suite of tools, called Bedrock, to be used for artificial intelligence (AI).
Bedrock gives customers the ability to use foundation models (FMs) - AI-based technologies built by "leading AI startups" - with their own data to create the model they need at that particular time, without having to invest in servers.
"We see room for AMZN shares to move higher as AWS reaccelerates in 4Q as Bedrock expands," Walmsley said in a research note on Wednesday, adding that channel checks makes him "more sanguine" on AWS prospects in generative AI. The analyst maintained a Buy rating on the stock, but increased the price target from $130 to $150, representing a 23.7% upside to AMZN's last closing price of $121.23.
Amazon's (AMZN) announcements on its AI capabilities have been met with a more muted response compared to peers Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) and other major technology names such as NVIDIA (NVDA). Moreover, the company in its last quarterly report forecasted a slowdown in cloud computing - which it said started in April - due to customers looking to decrease spending amid economic uncertainty. 
"While AWS is coming from behind on LLMs (large language models), our checks suggest that FMs could be commoditized, which would benefit AWS," UBS' Walmsley said. 
"Channel contacts expect AWS to catch up quickly in its LLMs and AI focused chips, which should see plenty of demand regardless given shortages. We see the broader rollout of Bedrock driving more demand later this year," Walmsley added.
The analyst acknowledged that Amazon's (AMZN) "valuation has run" but said that he saw room for further expansion.
AMZN stock is rated a Strong Buy by Wall Street analysts. On the other hand, the SA Authors rating and the Seeking Alpha Quant rating is Hold.
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