Amazon (AMZN) could become a significant threat to Nvidia (NVDA). Amazon manufactures its own custom chips that generate around $50 billion every year. The company may now sell its purpose-built AWS Trainium processors to outside customers, directly challenging Nvidia’s dominance.
Will Amazon Overshadow Nvidia In The Future?
According to a Bloomberg AMZN report, Amazon reportedly wants to expand its AI chips beyond the Amazon Web Services (AWS) ecosystem. CEO Andy Jassy spoke about the growing demand for custom AWS chips at the company’s earnings conference call earlier this year. The company has spent years developing the Trainium and Inferentia processors to reduce reliance on third-party providers.
Amazon Web Services (AWS) controls about 28% of global cloud market share. This could allow Amazon to bundle AI chips with services. Such a move could allow Amazon to steal Nvidia’s clients without needing to outperform the chipmaking giant. If customers decide to move their workload to Trainium chips, it could make Amazon the largest competitor in the AI sector.
Amazon’s AI venture is not a small scale experiment anymore. The business has grown into a worthy competitor that Nvidia and others should take seriously. While Nvidia dominates with its software, Amazon has the advantage of being directly connected with AWS customers. Amazon does not need to sell an AI chip separately, but can simply bundle it together with its services.
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Nvidia’s massive stock price surge over the last few years has been solely due to the high demand for AI platforms and chipsets. If Amazon can tap into their existing clientele and offer AI computing power, it could eat away at Nvidia’s customer base. Such a move could also lead to Amazon stock price seeing a massive jump. However, Nvidia has a well established chain and challenging the company is no easy task.