Amazon Surge 14% on Cloud Growth, AI Momentum Lifts Tech Stocks

Amazon.com Inc. shares jumped 13.7% to 14% in early trading Friday, lifting the Nasdaq and other indexes as the e-commerce and cloud giant delivered quarterly results that reassured investors about the returns from artificial intelligence investment.

The rally followed Amazon's report of its strongest quarterly revenue growth in more than four years, according to a Reuters report. Amazon Web Services (AWS) generated $42.23 billion in revenue during the June quarter, ahead of analysts' expectations of $40.54 billion, as reported by NDTV Profit. The company's cloud unit posted its fastest growth since 2021.

Amazon also revealed that AWS's AI business and chips attracted over $25 billion in annualized revenue, more than double the level a year earlier, NDTV Profit reported. Net income rose to $35.77 billion, or $4.81 per share, from $27.23 billion, or $3.65 per share, in the same quarter a year ago.

JPMorgan raised its price target on Amazon stock to $365 from $330, implying nearly 40% upside from Friday's levels, according to NDTV Profit. The Wall Street brokerage cited expanding margins, accelerating AI monetization, and resilient cash flows as drivers. JPMorgan analysts said strong operating cash flow gives Amazon the financial flexibility to continue investing heavily in AI infrastructure without straining its balance sheet.

"Amazon showed us, without a shadow of a doubt, that the web-services or AI side of the business is driving growth for the company," said Adam Sarhan, chief executive of 50 Park Investments in New York, as reported by Reuters. "Investors are able to look past the free-cash-flow decline because it is one component. If growth continues, it will make up for that shortfall."

The S&P 500 consumer discretionary sector rose 5.2%, driven largely by Amazon's gains. At 9:47 a.m. ET, the Nasdaq Composite advanced 86.20 points, or 0.34%, to 25,208.37; the S&P 500 gained 10.05 points, or 0.12%, to 7,446.54; and the Dow Jones Industrial Average rose 82.26 points, or 0.16%, to 52,290.32. At the open, the Nasdaq was up 1% to 25,383.70, the S&P 500 up 0.62% to 7,483.87, and the Dow up 0.42% to 52,429.21, before paring gains.

Other major technology stocks also rose. Microsoft shares gained 1.8% after a record single-day gain the prior session. Alphabet and Meta each advanced more than 2%. Among semiconductor stocks, Nvidia climbed 1.3% and Micron added 1.6%.

Gains were tempered by Apple, whose shares fell 9.8% in early trade after the company cautioned that supply constraints would weigh on growth.

Market participants had viewed this week as a crucial test for the technology sector. AI-linked stocks came under pressure in July as investors locked in profits and awaited evidence that substantial AI investments were translating into returns. Amazon's results, along with similar results from Microsoft and Alphabet earlier this month, encouraged investors to focus on accelerating growth rather than declines in free cash flow.

Later in the session, Wall Street indexes erased gains and turned lower. The S&P 500 fell 0.4%, the Nasdaq dropped 0.27%, and the Dow declined 0.34%, according to NDTV Profit. The shift followed a rise in the yield on 10-year Treasuries by six basis points to 4.73%, while the Bloomberg Dollar Spot Index rose 0.4%.

The Federal Reserve kept its benchmark rate unchanged this week. Comments from Chair Kevin Warsh, along with a benign inflation report on Thursday, prompted traders to raise the probability of rates remaining unchanged in September to 35%, from about 18% a week earlier, according to CME's FedWatch tool.

Despite the late-week rebound, the S&P 500 and Nasdaq remained on track to end July in negative territory after the steep selloff in AI-related stocks during the month.