Amazon's AWS growth slows down, contributing to Amazon's stock underperformance.

Amazon's AWS continues to experience sluggish growth, prompting a Sell rating due to elevated valuation. Despite an 11% stock price increase, the company's reliance on AWS for growth remains a concern. As a finance expert with experience at Bloomberg, I recommend caution when investing in Amazon due to the uncertainty surrounding its cloud computing business.

Amazon (AMZN) shares have been under pressure as the company's artificial intelligence (AI) cloud business, Amazon Web Services (AWS), continues to lag behind competitors. Despite an 11% stock price increase, concerns over AWS's performance have led to a Sell rating for the company.

The Nasdaq 100 has gained nearly 12% in 2025, while Amazon shares are up almost 4%, placing the stock in the lower half of the index [1]. The slowdown in AWS's growth is a significant concern, with the service reporting 17% revenue growth in the second quarter of 2025, compared to Microsoft Azure's 39% and Google Cloud's 32% growth [1].

A key factor in AWS's underperformance is the loss of talent to competitors. Arm Holdings (ARM) hired Rami Sinno, who was Amazon’s director of AI chips and led the development of its Trainium and Inferentia processors at Annapurna Labs [1]. This shift could represent a setback for Amazon as it seeks to expand its role in advanced computing.

Moreover, Amazon has set aside $100 billion for cloud and AI capacity in 2025, but investors have yet to see clear returns from these investments. While Amazon has introduced projects like DeepFleet and Bedrock AgentCore, these have not gained the same level of attention as products from Microsoft or Meta (META) [1].

Despite these challenges, Wall Street remains largely positive on Amazon. More than 90% of analysts maintain buy ratings, citing the company's strong scale and long-term prospects [1]. However, the stock's weaker performance in 2025 is seen as a pause rather than a lasting change in its outlook.

Recommendation: As a finance expert with experience at Bloomberg, I recommend caution when investing in Amazon due to the uncertainty surrounding its cloud computing business. While the company boasts a strong bullish sentiment among Wall Street analysts, with an average stock price target of $264.38, the reliance on AWS for growth remains a concern [1].

References:
[1] https://www.tipranks.com/news/amazon-amzn-stock-falls-as-aws-loses-ground-in-ai-cloud-battle
[2] https://simplywall.st/stocks/us/retail/nasdaq-amzn/amazoncom/news/amazoncom-amzn-expands-music-discovery-with-auddias-free-ai
[3] https://financialpost.com/pmn/business-pmn/oracle-rides-major-deals-with-openai-nvidia-to-turn-around-cloud-business