Amazon's 2025 stock gains just got wiped out. Here's how it could make a comeback.

By Christine Ji Shares of Amazon are back in the red for the year, but a further AWS reacceleration could change their fortune in 2026 Morgan Stanley analyst Brian Nowak believes AWS could potentially reach 25% growth in 2026. After a brief reversal, Amazon.com seems to have returned to its status as a major "Magnificent Seven" laggard, with shares slipping back into negative territory for 2025. As of Thursday's close, Amazon's (AMZN) stock was down 1% for the year. That marked the first time in a month that the stock was in the red for 2025, showcasing how an upbeat earnings report in late October wasn't enough to drive positive stock momentum in light of broader pressure on artificial-intelligence names. At their peak close in early November, shares of Amazon were ahead 16% on the year. But the Big Tech AI winners are far from decided, and Morgan Stanley analyst Brian Nowak believes Amazon's stock will fare better next year. In a Wednesday note, Nowak reiterated his overweight rating and price target of $315 - implying 45% upside from current levels. The key to a stock comeback lies with Amazon's cloud business. After a disappointing second quarter, Amazon wowed investors in October when it reported a third-quarter reacceleration at Amazon Web Services, which grew revenue 20% year-over-year. The optimistic news helped fuel a brief surge in Amazon's stock. There's more from where that came from, according to Nowak. While Nowak assumes a base case of 23% AWS growth in 2026, he also sees a path for AWS to achieve or exceed 25% growth thanks to an accelerating cloud backlog from AI workloads. Notably, Amazon announced a seven-year, $38 billion deal with OpenAI, which drove the stock to its peak earlier this year. Additionally, AWS will continue to benefit from enterprises migrating from on-premise to cloud solutions. Read: Amazon's new OpenAI deal offers further proof the stock has become an AI winner The OpenAI deal is expected to provide a key boost to AWS' backlog in the fourth quarter of 2025, and sends a signal to investors that Amazon is expanding to sell compute beyond its primary cloud infrastructure partner Anthropic. Going into 2026, Morgan Stanley's backlog model predicts that $60 billion in net new backlog would translate to 25% AWS growth. AWS could achieve 27% year-over-year growth if net new backlog reaches $75 billion. Nowak also estimates that every $15 billion added to 2026 backlog will translate into one percentage point of AWS growth. Nowak's opinion isn't shared by many on Wall Street, as consensus estimates have AWS growth remaining flat at 20% for 2026. Additionally, Rothschild & Co Redburn analyst Alex Haissl recently downgraded shares of Amazon to neutral from buy, arguing that the unit economics of AI workloads are much less lucrative than those for traditional cloud businesses. Amazon's stock is also trading at a considerable discount to its Big Tech peers, making the recent price drop an attractive entry point for Amazon bulls. At current levels, Amazon trades at a price-to-earnings-growth ratio of 1.4x, which is a 50% discount to the 1.9x median that a basket of its Big Tech and retail peers trades at. Also read: Amazon and Microsoft's stocks could be in trouble due to AI's destructive economics -Christine Ji This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 11-21-25 0923ET