• Morgan Stanley names Amazon a top stock pick, betting on its aggressive push into the $600 billion U.S. fresh grocery market.
  • The firm estimates that every 1% of market share captured could add 120 basis points to U.S. gross merchandise volume.
  • Profitability concerns are mitigated by a $25 order minimum, higher margins on fresh goods, and larger average basket sizes.

Morgan Stanley has elevated Amazon.com Inc. to its list of top investment ideas, a significant endorsement that hinges on the tech giant's expansive and well-orchestrated move into the massive U.S. grocery sector. The firm's analysts see the planned rollout of fresh grocery delivery to 2,300 cities by year-end as a primary catalyst for growth, a strategy made possible by substantial behind-the-scenes investments in cold-chain logistics and its network of physical stores.

According to the investment bank's analysis, the sheer size of the prize makes the play compelling. The U.S. fresh grocery market is valued at approximately $600 billion, and Morgan Stanley calculates that Amazon needs only a modest slice to move the needle. They project that capturing a single percentage point of market share would boost the company's U.S. gross merchandise volume by 120 basis points.

This isn't a shot in the dark for Amazon. The company has been methodically preparing its infrastructure, retrofitting fulfillment centers with specialized cold storage facilities to handle perishables. This logistical backbone, combined with its physical assets from Whole Foods Market and Amazon Fresh stores, provides a significant competitive moat that pure-play delivery services or traditional grocers struggle to match. The expansion is already putting pressure on rivals; shares of several competitors, including DoorDash, Kroger, and Walmart, dipped following Amazon's initial announcement.

A key question for investors has been whether low-margin groceries can be a profitable venture. Morgan Stanley asserts that Amazon's model is designed to protect margins. The firm points to the implementation of a $25 minimum order requirement, the inherently better margins on fresh goods compared to other e-commerce categories, and the tendency for grocery orders to be larger than typical digital baskets. "This expansion can generate incremental profit while boosting overall network efficiency," the analysts noted in their report.

The strategic push comes as Amazon unifies its grocery leadership under Whole Foods CEO Jason Buechel, who now also oversees the Amazon Fresh and Amazon Go formats. This consolidation of oversight, alongside plans to fully integrate Whole Foods' corporate staff with Amazon's central structure by the end of 2026, signals a more cohesive and determined approach to capturing grocery market share, a goal that has seen fits and starts since the landmark acquisition of Whole Foods in 2017.

With online grocery sales hitting $10 billion in July 2025—a 26% year-over-year increase—the digital shift in consumer behavior continues to offer a powerful tailwind. Amazon, already the number two digital grocery retailer in the U.S. with a 22.6% share, is now positioned to leverage its scale and logistics prowess to challenge Walmart's top position in a sector that is rapidly maturing and consolidating.