NEW YORK — Amazon Web Services is increasing its capital expenditure on custom artificial intelligence silicon development and global data center capacity. The company plans to deploy an additional $15 billion over the next two years, targeting expansion of its Trainium and Inferentia chip production alongside new data center facilities. This strategic push aims to provide more cost-effective AI solutions for enterprise clients seeking to build and deploy generative AI models, strengthening AWS's competitive standing in the market.
Analysts at Goldman Sachs raised their price target on Amazon stock to $310 from $285, maintaining a Buy rating. The firm cited AWS's enhanced AI capabilities as a key driver for future revenue acceleration, projecting a 20 percent compound annual growth rate for the cloud segment through 2028. Amazon stock traded at $264.14 today, down 1.2 percent as broader market indices like the Nasdaq fell 1.5 percent. This valuation does not yet fully reflect the potential upside from AWS's AI commitment.
The expanded AI infrastructure allows AWS to offer proprietary machine learning services, such as Bedrock and SageMaker, at scale. This move directly challenges offerings from Microsoft Azure and Google Cloud, which also develop custom silicon. Amazon's vertical integration strategy reduces its reliance on third-party GPU providers like Nvidia, potentially improving gross margins for the cloud division and giving it greater control over its supply chain. The company's commitment to in-house chip design signals a long-term strategy to capture a larger share of the enterprise AI market, estimated to reach $500 billion by 2030.
AWS currently holds approximately 31 percent of the global cloud infrastructure market, maintaining its lead over Microsoft and Google. Its investment in AI silicon is critical for defending this position and expanding into new high-growth areas. The strategic focus on custom chips like Trainium, optimized for AI model training, and Inferentia, designed for inference, provides a differentiated offering for specific customer workloads. This targeted approach aims to secure long-term contracts with large enterprises adopting AI at scale.
Options traders have shown increased interest in Amazon call options expiring in the second half of 2026, indicating bullish sentiment on the company's long-term growth prospects. High volume in out-of-the-money calls suggests investors anticipate upside beyond current levels. This options positioning aligns with the view that AWS's AI investments will yield financial returns, potentially driving the stock toward the new analyst price target.
