Amazon Web Services is facing growing scrutiny as Wall Street questions its position in the AI cloud race, with some analysts labeling it as falling behind Microsoft Azure and Google Cloud. Bernstein analyst Mark Shmulik recently stated that AWS is in “last place” when it comes to AI, citing slower revenue growth, limited GPU capacity, and a shift in where AI startups are building their infrastructure. He pointed to Microsoft’s early alliance with OpenAI and Google’s full-stack AI strategy—featuring its Gemini models, custom TPUs, and strong cloud infrastructure—as key reasons for the gap. The concern is amplified by the fact that many new AI startups are choosing platforms other than AWS, a trend highlighted by a recent Business Insider report indicating Amazon is worried about how generative AI is reshaping cloud spending. Shmulik noted that AI has fundamentally altered the cloud landscape, creating a high-stakes race for data centers, GPUs, and specialized compute power. Despite these challenges, Shmulik argues that being late to the AI wave isn’t necessarily a death sentence. History shows that dominant tech incumbents can recover from setbacks—Meta rebounded after TikTok’s rise, and Google has regained momentum following the launch of ChatGPT. Amazon, he suggests, has the resources and scale to make a comeback. There are already signs of progress. AWS posted its second-best quarter ever for net new dollar growth in Q2, and while capacity constraints remain, they are beginning to ease. Developer engagement with AWS services has increased significantly since the start of the year, with momentum building through the summer. Shmulik also highlighted AWS’s strategic partnership with Anthropic as a major catalyst. Amazon has invested at least $8 billion in the AI startup and is co-developing Project Rainier, a next-generation AI supercomputer powered by Amazon’s custom AI chips. This initiative could shift the balance, especially since Google has been Anthropic’s primary compute provider for inference workloads. Bernstein estimates Project Rainier could contribute up to 2.6% of AWS revenue in 2026 and potentially over 4% by 2027. With strong momentum in developer adoption and growing revenue expectations, Shmulik forecasts AWS revenue will grow 18% this year to $127 billion, followed by 21% growth in 2026 and 2027. While the AI cloud battle remains intense, Shmulik remains optimistic that AWS can reposition itself. He believes the upcoming AWS re:Invent conference could be the turning point that shifts the narrative from “laggard” to “late but leading.” For now, Amazon’s scale, deep customer base, and strategic investments suggest it still has multiple paths to win in the AI era.