Amazon’s $125B Capex Strategy: AI Infrastructure, AWS Growth, and $300+ Share Price Projection

This analysis draws on market data and external reports [0][1][2][3][4][5]. Amazon’s $125B 2025 capex (raised from $118B) prioritizes AI infrastructure for AWS—including custom Trainium/Inferentia chips to support AI workloads—with capex growth expected to accelerate in 2026 [0][1]. This investment translated to AWS reporting 20.2% YOY revenue growth in Q3 2025 (to $33B, fastest since 2022) and a $200B+ backlog growing ~22% annually; AWS contributes ~18% of total revenue but ~52% of operating income [2][3][4]. Complementing this, Amazon’s advertising business generated ~$17.7B in Q3 2025 (26% YOY growth), a high-margin stream that reduces retail-related volatility [5]. Despite these strengths, AMZN lagged Magnificent 7 peers in 2025 YTD performance (up 2.4% vs. NVDA +33%, MSFT +14%), possibly reflecting short-term market sentiment [0]. Analysts project AWS growth could reach ~25% in 2026 as AI infrastructure scales, supporting the $300 consensus price target [2][4].

1. AI Infrastructure Differentiation
   : The capex (focused on custom AI chips) positions AWS to capture AI workload demand efficiently, boosting margins and competitiveness against Azure/Google Cloud [0][1].
2. Resilient Revenue Mix
   : Combined AWS (high-profit cloud) and advertising (high-margin) growth reduces Amazon’s reliance on lower-margin retail, creating a more stable business model [5].
3. Sentiment-Fundamental Gap
   : The 2025 underperformance may present an opportunity, as the $300 target (32% upside) is backed by tangible AWS backlog and advertising growth [0].

• Opportunities
  :
  • Capture AI cloud market share via scaled infrastructure [2][4].
  • Leverage AWS AI to enhance retail personalization and other services [0].
  • Expand high-margin advertising amid growing digital ad spend [5].
• Risks
  :
  • Execution challenges in deploying $125B in capex (cost overruns, delays) [0].
  • Intense cloud competition from Azure/Google Cloud [0].
  • Regulatory scrutiny (e.g., FTC Prime settlement) impacting earnings [4].
  • Economic slowdowns affecting retail or higher rates increasing capex costs [0].

Amazon’s $125B capex is a strategic AI infrastructure investment for AWS, driving reaccelerated growth (20.2% YOY Q3 2025) and a $200B+ backlog. Its advertising business (26% YOY growth) diversifies revenue. Despite lagging Magnificent 7 peers, analysts project $300/share by 2026 (32% upside). Investors should monitor execution, competition, regulation, and economic conditions.