DA Davidson has downgraded Amazon from Buy to Neutral, citing concerns about its AWS cloud computing division. Analyst Gil Luria believes Amazon is losing its lead in the cloud market, particularly to Microsoft Azure and Google Cloud. This assessment comes as Amazon faces new challenges in the rapidly evolving AI-driven retail sector.

AWS growth of 24% year-over-year is being outpaced by Google Cloud's 48% and Azure's 39%. The firm also lowered the price target to $175, pointing to heavy spending needed to catch up. Amazon's lack of a major AI lab and primary OpenAI partnership contributed to the shift in customer preference, according to the analyst.

Furthermore, DA Davidson is worried about Amazon Retail's ability to adapt to a new, chat-driven internet. Without direct integrations, the company risks a “structural disadvantage,” as merchants integrated into leading models could gain a material edge. The firm highlighted Amazon's over $200 billion in capital expenditures and potential $50 billion investment in OpenAI.

Amazon's fourth-quarter revenue was $213.4 billion, up 13.6% year-over-year, with AWS revenue rising 23.6%. The company's guidance for the first quarter of $176 billion, implies 13% growth. This downgrade reflects growing concerns about Amazon's ability to maintain its dominance in a competitive tech environment.