Amazon Web Services is aiming to expand its presence in the AI chip market, potentially challenging Nvidia’s leading position like never before.
Peter DeSantis, Amazon’s AI leader, mentioned in a conversation with Bloomberg that AWS is considering offering its AI chip, Trainium, to other businesses for data center applications. However, he did not disclose which companies might be interested in making such purchases.
Discussions regarding chip sales are still in the preliminary phase, according to the company, and originated from AWS CEO Andy Jassy’s shareholder letter earlier this year. In that letter, Jassy noted the high demand for Amazon’s proprietary AI chips, suggesting the possibility of selling them externally.
Jassy stated, “If our chip business operated independently and sold chips produced this year to AWS and third parties (like other leading chip manufacturers do), our annual revenue could reach around $50 billion. Given the demand for our chips, it seems likely we’ll offer them to external clients in the future.”
Could Amazon pose a significant threat to Nvidia? While a $50 billion contender wouldn’t drastically hurt Nvidia, which boasts a revenue run rate of $326 billion if it continues its recent performance, it would resemble Intel’s annual revenues closely.
So far, AWS has refrained from selling its AI chips for several reasons. A primary factor is that the financial benefits gained from its chips come from a ripple effect. While AWS charges customers for the AI processing performed by these chips on its cloud, it also benefits from various other services required for AI applications, such as storage, security, networking, and monitoring services.
Moreover, Amazon highlights that its chips sell out faster than they can be manufactured. In the same shareholder letter from April, Jassy noted that the current supply of Trainium chips sold out almost immediately, as did the supply for Trainium4, which won’t even be available for over a year. This announcement came before AWS officially integrated OpenAI into its offerings.
If Amazon decides to sell its chips to other parties, it may face the challenge of leaving current clients on waitlists unless it can increase production through partnerships with manufacturers like TSMC. This could be particularly difficult given that TSMC has recently become the largest client of the foundry, overtaking Apple.
Doron Aronson, an AWS spokesperson who guided a recent private tour of the AWS chip design facility, confirmed that the company is exploring the sale of its chips. “While we’ve historically opted not to sell chips directly, Andy pointed out that it’s very likely we’ll offer racks of them to third parties in the future.”
While Nvidia’s CEO Jensen Huang has recently proclaimed a new $200 billion market opportunity for Nvidia in selling not just GPUs but also CPUs for AI—venturing into territory traditionally held by Intel and AMD—Jassy clearly has ambitions of his own: a $50 billion market that could more directly influence Nvidia’s domain.
