Amazon (AMZN) has gained about 6% over the past five days, at the time of writing, Thursday afternoon, Jan. 8. Meanwhile, SPY is up less than half a percent in the same period. Starting the year by beating the S&P 500 might be a good omen for Amazon.

The company concluded the last year with several notable announcements at the AWS re:Invent conference in December, the most significant being the Trainium 3 chips. Readers who need a reminder about key announcements and how analysts reacted can read my previous coverage.

Bank of America analyst Justin Post and his team conducted an analysis of what 2026 may bring, updating their opinion on AMZN stock.

Justin Post’s team said Amazon is their top mega-cap pick for the first half of 2026.

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Bank of America says Amazon is its top mega-cap internet/e-commerce pick

The team said Amazon is their top mega-cap pick for the first half of 2026, given exposure to AI via AWS.

Analysts believe there is an upside to Wall Street‘s AWS estimates for 21% growth in 2026, as the business enters the year with a significantly improved data center capacity position compared to 2025.

They noted that margin expansion would remain a key theme for 2026, with margin drivers including headcount discipline, improved inbound efficiencies, advertising growth, and the capitalization of Kuiper, which is expected in the first half of 2026.

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The team estimates that GAAP operating income will grow 25% in 2026, above mega-cap peers, which should also support Amazon’s valuation as AWS revenues accelerate.

Analysts believe that AWS’s AI capabilities could improve in 2026, due to the recent management changes signaling an increased commitment to AI innovation, while continued progress on custom Trainium chips will help close the performance gap.

The team noted that Amazon is rolling out Trainium 3 chips in 2026, which can deliver 4.4 times more compute and 4 times greater energy efficiency than Trainium 2. Analysts expect customer adoption to expand beyond Anthropic in 2026.

In a research note shared with me, Post reiterated a buy rating and a target price of $303 for Amazon stock, based on his sum-of-the-parts analysis, which values AWS at 10x 2027 sales, first-party retail at 1.1x, third-party retail at 2.5x, and advertising at 5.0x. Post’s price target implies a 3.7 times blended price to sales ratio, 13 times 2027 EBITDA, and 33 times 2027 EPS.

Analysts noted downside risk factors for Amazon:

  • Increasing competition from offline and local retailers
  • AWS client cost optimization impact on revenues and margins
  • Regulatory pressure on the third-party marketplace

They also noted that the stock has been subject to heavy volatility in the past, based on margin trends, and this volatility could increase due to economic uncertainty.

Recent Amazon activity

Infosys (INFY), a digital services and consulting firm, entered into a partnership with AWS. The two companies are combining Infosys Topaz, an AI-first set of services, solutions, and platforms using gen AI, and Amazon Q Developer, AWS’s gen AI assistant.

Infosys Topaz is designed to enhance productivity in software development, HR, recruitment, sales, and vendor management.

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The company provides an example of how, in the software development lifecycle, the integration of Infosys Topaz with Amazon Q Developer enables automated documentation and provides tailored support for tasks such as code generation, debugging, testing, and legacy code modernization, significantly enhancing workflow efficiency and accuracy.

AUMOVIO, a technology and electronics company, and AWS entered into a strategic agreement, making AWS AUMOVIO’s preferred cloud provider for autonomous driving development.

The partnership also brings AI capabilities to AUMOVIO’s autonomous development and validation workflows, with the intention of accelerating the process of developing, testing, and preparing autonomous vehicles for real-world deployment.

“Our collaboration with AWS is a cornerstone of our strategy to lead the transformation to autonomous mobility,” said Ismail Dagli, Executive Board member and head of the Autonomous Mobility business area at AUMOVIO.

“We are creating a solution that combines cloud infrastructure, AI capabilities, and automotive expertise, efficiently turning data into actionable insights across complex information environments,” Dagli added. “This collaboration is not only about accelerating development for our customers, but also about helping promote safety, efficiency, and innovation in autonomous driving.”

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