Amazon rose 3% on news of AI chip sales. A new challenge for Nvidia?

Shares of online giant Amazon rose 3% on June 18 after it was reported that the company is in talks to sell AI chips to other companies to equip their data centers. This is an important step in Amazon’s efforts to weaken Nvidia’s dominant position in the semiconductor market, according to Bloomberg.

Amazon Web Services (AWS), the online giant’s cloud division, has begun discussions with potential customers interested in using its specialized Trainium chips, Amazon’s head of AI, Peter DeSantis, said in an interview with Bloomberg. He did not specify exactly who Amazon is in talks with.

“We view AI infrastructure as a rapidly evolving environment,” DeSantis emphasized. “And we’re constantly looking for ways to attract more customers.”

An Amazon spokesperson, in comments to Barron’s, described these discussions as “preliminary exploratory talks.”

On Thursday, June 18, Amazon's stock rose 3%. In premarket trading on June 19, it was down about 0.5%.

Amazon and other cloud giants have begun actively developing alternatives to Nvidia’s graphics processing units (GPUs) following the emergence of the ChatGPT artificial intelligence system, which has sharply increased demand for such chips, Bloomberg reports. Now, by equipping third-party data centers with its own processors, Amazon could enter into direct competition not only with the market leader but also with Advanced Micro Devices (AMD), Barron’s notes. So far, this sector remains surprisingly stable: Nvidia still controls more than 80% of AI accelerator sales, while AMD has firmly established itself as the number two player, Barron’s adds.

Amazon’s AI chip, called Trainium, has already attracted several major customers, including OpenAI, Anthropic, and Uber. In April, Amazon announced that the chip had already generated more than $225 billion in contract revenue commitments, according to Bloomberg. The third version of the Trainium chip, which began shipping earlier this year, is “virtually sold out,” DeSantis noted in an interview with Bloomberg. Amazon added that there is already strong interest in the fourth version, which is expected to debut next year.

DeSantis also dismissed concerns that selling Trainium outside of AWS would harm the company’s cloud business. “There is such a huge consumption gap in the AI sector right now that it doesn’t worry me at all,” he said in an interview with Bloomberg.

The sale of Trainium to third-party companies could provide AWS with another source of revenue to boost Amazon’s stock price, Barron’s notes. Like other cloud service providers, such as Meta, Oracle, and Microsoft, Amazon’s stock has underperformed the broader market over the past year as investors have become wary of the capital expenditures required to build and equip data centers.

Even if Amazon builds a successful chip-making business capable of supporting its stock, it may not even have to poach customers from Nvidia, Barron’s notes. In an analyst report published earlier this week, JPMorgan forecasts that capital investment in AI accelerators will reach $800 billion in 2030, up from just over $300 billion in 2026. This is a colossal amount of new demand, which should be enough for Amazon, Nvidia, and other market players.

According to MarketWatch, most analysts strongly recommend buying Amazon stock: out of a total of 73 ratings, 71 are "Buy" or "Overweight." Only two analysts recommend holding the stock ("Hold"), and there are no "Sell" recommendations.

This article was AI-translated and verified by a human editor