A $10,000 Investment in This AI Stock Today Could Be Worth $20,000 by 2030
Key Points
Amazon Web Services' growth is accelerating, with annualized revenue of $150 billion.
Demand for Amazon's custom AI chips is supercharging its cloud revenue segment.
It has secured $225 billion in revenue commitments for its Trainium chip.
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After falling to around $199 at the end of March, Amazon (NASDAQ: AMZN) stock surged to new highs and currently trades at $264. A big reason for this is momentum in the cloud business. Management shared revealing details on the recent earnings call that suggest the stock is undervalued.
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Amazon's most valuable business is surging
Retail is still Amazon's biggest revenue driver, but cloud computing is its most profitable business segment (accounting for 59% of first-quarter operating profit) and one of its fastest-growing revenue streams. In Q1 2026, Amazon Web Services (AWS) revenue rose 28% year over year to $37.6 billion. That was AWS' fastest growth rate in 15 quarters. It's now running at a $150 billion annualized pace and remains the cloud market leader with 29% market share, according to Synergy Research.
"It's very unusual for a business to grow this fast on a base this large," CEO Andy Jassy said.
Businesses are choosing AWS because of its broad set of AI tools, including SageMaker for model building, and Bedrock for creating and managing artificial intelligence (AI)-powered agents that can autonomously complete complex tasks. Customer spending on Bedrock jumped 170% year over year in the quarter.
As AI becomes more advanced, demand for AWS grows. CFO Brian Olsavsky said, "Customers seeking the full benefit of AI are accelerating their transition to the cloud." Importantly, the demand for these services and the compute that powers them is opening up another major revenue stream in Amazon's custom silicon.
Amazon is becoming a leading semiconductor company
Amazon said its custom-designed chips (Trainium and Graviton) generated $20 billion in annualized revenue last quarter, and it's growing at a triple-digit rate. However, Jassy noted that if Amazon treated its chip segment as a stand-alone business and sold chips to itself and other companies, it would be a $50 billion-a-year business. This revenue stream could eventually be worth at least a few hundred billion, if not more.
Amazon has a history of accelerating its capital spending when it sees a significant growth opportunity, as it did 15 years ago with AWS. It clearly sees a similar opportunity in AI infrastructure, including chips.
Amazon expects capital expenditures to reach $200 billion in 2026, up from $131 billion in 2025. That higher spending could weigh on near-term free cash flow, but assets like data centers can generate returns for decades, while chips typically have a useful life of five-plus years.
Jassy underscored the opportunity: "We now have over $225 billion in revenue commitments for Trainium. Our Trainium2 chip has about 30% better price performance than comparable GPUs and is largely sold out."
For perspective, Amazon's online retail store generated $276 billion in trailing 12-month revenue, but is growing at single-digit rates. This means its chip revenue alone is on pace to potentially exceed that of its e-commerce business in the next several years.
Strong earnings from AWS can double the stock
Some scenarios could derail the stock's path to doubling in value. Other than normal market volatility, anything that stalls the AI build-out -- power shortages or new regulations on data center construction -- could slow growth at AWS.
However, if AWS continues to grow rapidly, the high margins from cloud services provide ample upside for the stock. Amazon's net income climbed 31% in 2025, and analysts expect earnings per share to grow at an annualized rate of 21% over the next few years.
The stock trades at 31 times this year's earnings estimate and 27 times next year's -- not cheap, but reasonable for a company at the center of the AI cloud boom. If Amazon is still valued at around 25 times earnings in 2030, a share price doubling from here looks achievable.
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John Ballard has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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