Evercore ISI analyst Mark Mahaney believes investors are underestimating the impact artificial intelligence will have on Amazon, naming the company his top large-cap stock pick.
Mahaney cited Amazon’s attractive valuation following a recent dip as the primary reason for the upgrade. He shifted the online retailer to the No. 1 position, moving Uber to the No. 2 spot. “Shares traded off on the Q4 print, but we viewed that as an Expectations Correction and not a Fundamentals correction,” Mahaney wrote in a note released Wednesday.
“We are also focused on two new product catalysts with the pending Alexa+ and Kuiper launches, and we believe there is an opportunity for a material narrative shift (to the positive) for AMZN as an excellent thematic play on robotization and on AI Cloud services, with the potential for Gen AI workloads to drive an acceleration in AWS revenue in H2:25,” Mahaney added.
Amazon shares have underperformed this year, falling more than 5% along with the broader “Magnificent Seven” stocks. This underperformance occurred as investor optimism dimmed due to high valuations and increased competition fears following DeepSeek’s release.
Mahaney’s price target for Amazon is $210, slightly above Wednesday’s closing price of $208.36. Amazon’s stock price declined over 12% since the company released disappointing guidance for the current quarter on February 6.
Despite the recent performance, Mahaney remains optimistic about large-cap internet companies based on recent earnings. He outlines three key reasons for his positive outlook including the “Return on Artificial Intelligence” story beginning to materialize, the internet sector’s strong demand trends, and continued cost-cutting measures that will improve margins. “The substantial number of successful AI deployment datapoints — successful in boosting engagement, monetization, cost efficiencies, etc. — suggests that the ROAI is proving out,” the analyst noted.
In Amazon’s case, Mahaney highlighted that its Amazon Web Services (AWS) AI business has grown to a multibillion-dollar revenue run rate, growing three times faster than its Cloud business did at a similar stage. He also noted that AI-driven automation is enhancing cost-efficiency at its most advanced distribution centers.
