AWS is actually a pretty high margin business (~25% operating margin is public, GM is not publicly known but good guesswork puts it ~50%). So, there's some hard data showing a lot of room for price competition.

If you'll allow me to get a bit more wibbly: I've been an engineer at both companies, and from a technical perspective, Google is much better at this stuff. In order to provide their own services, they've been operating at much larger scale for much longer than anyone else. There's a pretty long record of the new hot thing in the industry being something Google's been doing on the order of a decade. The basic deficit in experience is exacerbated by Amazon's relatively poor retention of its best talent.

Putting all of this together, it is my expectation that Google be able to build better services faster, and to operate them more efficiently. AWS started with a massive first mover advantage, but my expectation is that in the long run Google will have little difficulty closing that gap and pulling ahead, should it wish to.