Amazon.com shares surged 7% on Friday after the e-commerce heavyweight reported higher-than-expected holiday quarter sales and its lucrative cloud business signaled early gains from AI-powered features.

The company joined Microsoft and other tech firms in starting to see results benefiting from their heavy AI investments, while also outlining more spending in 2024 to develop the much-hyped tech.

“AWS (Amazon Web Services) is also seeing a strong ramp in early Gen AI revenue, though still a small contribution on a about $100 billion run-rate business. We believe AWS will gain meaningful traction in Gen AI over the coming year,” J.P. Morgan’s Doug Anmuth said.

At least 23 brokerages raised their price targets on the stock, as the online retail giant posted a 14% rise in sales in the holiday quarter, pointing to strong spending despite a strained economy.

“We believe Amazon is executing extremely well and the challenges the company faced in Retail during the pandemic and in AWS through optimizations will make the company stronger on the other side,” Anmuth said.

Shares of the company, which climbed 81% in 2023, were trading at $171.01, also lifted by an upbeat revenue forecast. Amazon projected current-quarter revenue to be as much as $143.5 billion. Analysts had expected $142.13 billion, according to LSEG data. “The real reaction is to their guidance, where other tech firms have been softening revenue ranges and earnings per share targets, Amazon has come out with a much higher-than-expected range,” said Jamie Meyers, senior analyst at Laffer Tengler Investments, which holds shares of Microsoft, Alphabet and Amazon.

As of last close, the stock was trading at 40.51 times its forward earnings per share, compared with 31.57 for cloud rival Microsoft and 23.75 for retail competitor Walmart .

Amazon is set to add about $120 billion to its market capitalization if gains hold.

Despite hefty investments this year going into building cloud infrastructure to support the rapid adoption of generative AI technology, investors were bullish.

“I would expect that the recent state of generative AI investments should eventually lead to strong return on investment,” said Krishna Chintalapalli, portfolio manager at shareholder Parnassus Investments.

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