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Amazon Shares Soar as AI Boom Drives AWS Cloud Growth and Record Investor Optimism

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Amazon shares surged more than 11% in early trading on Friday after its cloud computing arm, Amazon Web Services (AWS), reported strong growth and a bullish sales outlook that reassured investors of its position in the AI race.

AWS revenue rose 20% in the third quarter, reaching $33 billion — more than double Google Cloud’s $15.16 billion — cementing Amazon’s dominance in the cloud market. While Microsoft Azure’s 40% growth outpaced AWS in percentage terms, analysts said the scale of AWS’s business made its rebound even more significant.

“There were concerns about AWS losing market share to Microsoft and Google,” said Jed Ellerbroek of Argent Capital. “But now AWS is clearly back on track — investors expected this turnaround next year, and it’s arrived early.”

The strong quarter helped Amazon’s stock outperform rivals Apple and Tesla in year-to-date gains, lifting it out of the bottom spot among the “Magnificent Seven” tech giants. CEO Andy Jassy said AWS is “growing at a pace we haven’t seen since 2022,” driven by soaring demand for AI and infrastructure services.

Beyond cloud computing, Amazon’s retail and advertising segments also delivered impressive results. Retail sales grew 11% year-over-year, while ad revenue surged 24% to $17.7 billion, boosted by expanded placements across Echo devices and grocery stores. Following the results, at least 23 brokerages raised their price targets for Amazon, reflecting renewed confidence in the company’s long-term AI strategy.

Apple Shares Rise as Strong Holiday iPhone Sales Forecast Eases Supply Concerns

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Apple shares climbed about 2% in premarket trading on Friday after the company’s upbeat holiday quarter forecast reassured investors that strong demand for the iPhone 17 lineup is driving a sales rebound despite ongoing supply delays in China.

The company’s latest projections, announced earlier this week, helped ease concerns about production bottlenecks that had weighed on fourth-quarter performance. The optimism pushed Apple’s market capitalization back above $4 trillion, placing it alongside tech giants Nvidia and Microsoft in the exclusive multi-trillion-dollar club.

Investors also took comfort in Apple’s measured approach to integrating artificial intelligence, with analysts noting that the company’s strategy emphasizes precision over speed. “When you’re really big like Apple, you don’t have to move fast — sometimes you just have to get it right eventually,” said Eric Clark, Chief Investment Officer at Accuvest.

Despite its rally, Apple remains one of the weaker performers among the “Magnificent Seven” group of mega-cap tech stocks this year, trailing Nvidia and Microsoft but showing resilience amid global supply headwinds.

According to LSEG data, Apple’s stock trades at 33.4 times analysts’ earnings forecasts, above Microsoft’s 31.7 and Meta’s 22.3, reflecting investor confidence in the company’s long-term innovation and profitability.

AI Stock Shock Could Spark Broader Market Gains

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A recent shock in artificial intelligence stocks, driven by concerns over the low-cost Chinese AI model, could set the stage for broader gains in the U.S. stock market, potentially moving beyond the narrow group of tech shares that have dominated the current bull market.

The tech sector, led by mega-cap companies, has been the primary driver of market growth. Over the past two years, the S&P 500’s tech sector has surged about 90%, far outpacing the broader index. However, stocks of major tech firms like Nvidia, Broadcom, and Oracle took a hit on Monday as investors reacted to the impact of DeepSeek’s AI model, a new low-cost competitor from China.

Despite the drop, there are signs of a broader market rotation. While the S&P 500 fell by 1.5%, roughly 70% of the index’s constituents saw gains, indicating a shift away from the dominance of big tech. The S&P 500 growth index, which is tech-heavy, dropped about 3.6%, while the value stock index rose by nearly 1%, marking the largest one-day advantage for value stocks over growth in decades.

This development has led some analysts to predict a more balanced market leadership, which could benefit investors by diversifying opportunities beyond the tech sector. Keith Lerner from Truist Advisory Services pointed out that this shift would provide a broader range of profitable areas for investors.

The Magnificent Seven tech stocks—Nvidia, Apple, Microsoft, Google, Amazon, Meta, and Tesla—have been the cornerstone of market gains, accounting for 55% of the S&P 500’s total return since 2022. However, these stocks have recently underperformed, leading to speculation that other sectors may begin to lead market growth.

While many investors remain bullish on tech, there is growing sentiment that the earnings strength of the Magnificent Seven may start to level with the rest of the market. In 2025, earnings for these stocks are expected to rise 19%, compared to 12.3% for the broader index. As quarterly earnings reports come in, including from Microsoft, Meta, and Tesla, investors will be closely watching for signals that the market is broadening.

Peter Tuz, president of Chase Investment Counsel, remarked that Monday’s market drop acted as a wake-up call for investors who had viewed tech stocks as invincible, potentially leading to a shift in investment towards other sectors.

While tech bounced back on Tuesday, increasing by over 3%, analysts like Robert Pavlik from Dakota Wealth Management see an opportunity for a rotation into companies that could benefit from more affordable AI, particularly software firms. The impact of DeepSeek could ultimately lead to a shift in market dynamics, though it may take time for a broader market expansion to fully materialize.