With Microsoft Corp's MSFT Azure showing signs of slowing, Amazon.com Inc‘s AMZN AWS could seize the moment as AI demand stays red-hot.

Azure Stumbles, AWS Poised To Shine

Microsoft's latest earnings report revealed a slight deceleration in Azure's cloud growth, with second-quarter revenue rising 31% year-over-year — just shy of the 32% expected by analysts. AI remains a powerful tailwind, contributing 13% to Azure's growth, but Microsoft cited go-to-market challenges affecting non-AI cloud revenue.

For AWS, that's a potential opening. BofA Securities analyst Justin Post expects Amazon's cloud unit to post a solid 19%-20% growth in the fourth quarter, with the potential for further acceleration in the next quarter. With Amazon's Trainium chips in high demand and infrastructure spending ramping up, AWS could maintain its dominance in AI-driven cloud services.

Read Also: EXCLUSIVE: PodcastOne Partners With Amazon For Distribution, Expanding Monetization and Ad Targeting for Top Podcasts

AI Investment War Heats Up

According to Post, Microsoft isn't backing down, planning to pour $80 billion into AI investments in fiscal 2025. The analyst noted that efficiency gains are helping Azure scale, with management pointing to significant price-performance improvements between hardware and software generations.

However, Post highlighted that capacity constraints may still weigh on the third quarter, potentially giving AWS a window to gain ground.

Amazon's Cloud Edge

Post also pointed out that, unlike Microsoft, AWS primarily bills in U.S. dollars, insulating it from foreign exchange volatility. That stability, coupled with strong infrastructure demand, positions Amazon well in the AI arms race.

BofA maintains a Buy rating on Amazon, with Post highlighting an attractive risk-reward setup as AI continues to fuel cloud expansion.

With Microsoft facing minor hurdles, AWS could be poised to take full advantage of the next wave of AI-driven growth.

Read Next:

• Why VOO Investors Should Keep Calm Despite AI Stock Turbulence

Photo: Shutterstock