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Amazon has built two major businesses—e-commerce and cloud computing—that have supported rising earnings over time. Its e-commerce expansion from books into broader categories, along with Prime membership, helped anchor the business in customers’ daily lives. In cloud, Amazon Web Services (AWS), launched in 2006, has grown into the world’s biggest cloud provider, contributing to Amazon’s improving returns on invested capital.
In recent quarters, demand for AWS’s artificial intelligence (AI) offerings has accelerated growth. Now, Amazon chief Andy Jassy has offered clues that point to a potential next step for the company’s AI-related chip strategy.
In the recent quarter, Amazon reported $181 billion in revenue, up 17%, and $30 billion in net income. The article also notes that, over the past decade, periods of spending have produced returns in subsequent years.
Focusing on AWS, the article attributes recent momentum to the AI boom. AWS provides tools and infrastructure for AI development, including different categories of chips such as CPUs and GPUs, and access to Amazon Bedrock, a managed service that provides access to large language models.
As a result of this AI portfolio, AWS has reached a $150 billion annual revenue run rate.
A key part of the article’s thesis centers on Amazon’s own chips. AWS currently offers chips from third parties, including Nvidia, but it has also developed its own products: Graviton CPUs and Trainium, a GPU-style chip.
The article describes these chips as a “quality option” for cost-conscious customers. It also cites Amazon’s claim that its Trainium2 chip offers 30% better price performance than standard GPUs.
Demand for Graviton and Trainium has been strong, with most units reserved or sold out, according to Jassy’s comments during Amazon’s earnings call. The article states that Amazon’s annual revenue run rate for its chips is $20 billion, and that the company says this could rise to $50 billion if it sold chips to third parties on a model similar to Nvidia.
The article says Amazon has not already built a stand-alone chip business primarily because it needs to ensure sufficient production capacity for AWS customers. Jassy is quoted as saying, “We have such demand right now for Trainium, and we have such demand from various companies who will consume as much as we make.”
At the same time, the article notes that in both the earnings call and a shareholder letter earlier, Jassy’s comments suggested strengths of a stand-alone chip business could be emerging.
Based on these signals, the article’s prediction is that Amazon’s next big move could be creating a stand-alone chip business and selling to third parties. It frames this as a potential growth catalyst similar to how e-commerce and cloud computing have supported Amazon’s expansion over time.
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