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Amazon's (AMZN) under-the-radar robot push is widening its competitive lead in retail and could boost its profit margins big-time, Morgan Stanley managing director Brian Nowak said. 

"This is, I think, the most underappreciated part of Amazon's story — the potential retail leverage to come [from its robot investments]," Nowak told me on Yahoo Finance's Opening Bid podcast (see video above; listen below). 

Nowak said Amazon has quietly developed six significant next-generation fulfillment centers in the past three years that bring automation front and center. After touring one of the sites in Shreveport, La., Nowak recognized the potential for more operating efficiencies in the retail business. 

Amazon now has industrial robots that can increase efficiencies across the storage, inventory management, pick and packing, and sorting order fulfillment processes. 

Fulfillment costs make up about 20% of Amazon's retail revenue, so he reasoned that automation could have a significant impact on long-term operating profit potential.

Nowak says if 30% to 40% of Amazon's US units were fulfilled through next-generation robotics-enabled warehouses by 2030, it could lead to $10 billion-plus of savings.

Equally important, the robotics investments could give it a wider lead over retailers such as Target (TGT), who aren't moving as fast on this front.

"It's a major structural competitive advantage against other retailers as well as everyone else that does warehousing and distribution," Nowak said. "The other part of the goal for Amazon long term is they are trying to do more fulfillment and more distribution, even for items that are not sold on Amazon. And so to the extent to which they can roll out more robotics, they can drive the costs down and essentially be even more competitive on rates for other sellers and smaller retailers to use their network."

Nowak has an Overweight (or Buy equivalent) on Amazon's stock with a $280 price target. Amazon's stock currently trades at $228, up 4.35% year to date.

The investments in robots may already be paying off.

Amazon's North America retail operating margins on a trailing 12-month basis have risen for five straight quarters. North America operating margins improved to 6.2% from 4.6% a year ago.

The company expects to spend $104 billion on long-term assets this year. A large chunk of that will be on AI infrastructure, but robotics will chew up a chunk too, Nowak said.

Nowak added, "I think that the market is supporting Amazon despite that [strong capital expenditures] guidance because there is so much optionality to come from these GPU-related investments on both Amazon Web Services and retail that the stock isn't that expensive relative to growth if they can hit current Street numbers."

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Three times each week, I field insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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