Amazon the chip company? Tech giant says it may sell AI chips as a product, not just a cloud service

Amazon has announced plans to potentially offer its Trainium AI chips to external clients within the next two years, positioning the tech giant as a direct competitor to Nvidia. During the recent earnings call, CEO Andy Jassy indicated that the company is leaning towards selling complete racks of Trainium chips outside of its own cloud services, a significant shift from its current model. Previously, Jassy had only hinted at such possibilities in an April letter to shareholders, making this the first time a specific timeline has been mentioned. Currently, Trainium chips are available exclusively through Amazon Web Services, where customers can rent access to this powerful AI computing capacity online. The move to sell physical Trainium chip racks would represent a transformative change for Amazon, effectively transforming the company into a player in the semiconductor market. This shift could also lead to increased competition with Nvidia, even as Amazon continues to depend on Nvidia for its GPU supply for cloud services. Jassy highlighted the strong demand from various companies for Trainium, stating that the company must deliberate on how much of the production they can allocate. The CEO revealed that Trainium has garnered $225 billion in revenue commitments through cloud services from notable clients like OpenAI, Anthropic, and Uber, although the specific duration of these contracts was not disclosed. Moreover, Jassy asserted that Amazon ranks among the top three data center chip businesses globally, thanks to its expanding portfolio of Trainium AI chips and Graviton CPUs. He expressed confidence in the company's readiness to capitalize on the current market inflection. Following the earnings report, Amazon's stock experienced a nearly 3% uptick in after-hours trading, setting the stage for a potential record on Thursday. The company’s financial results exceeded Wall Street’s expectations, even as expenditures on data center expansion remain substantial. Amazon is currently engaged in an ambitious AI investment cycle projected to cost around $200 billion this year, highlighting the technology’s integral role in the company’s overall strategy. Additionally, Amazon's partnership with OpenAI continues to strengthen, with a commitment of $50 billion to the AI lab in exchange for the use of Trainium chips and collaboration on tailored models and AI services through Amazon's cloud platform. The company has also deepened its ties with Anthropic, pledging up to an additional $25 billion on top of the previously committed $8 billion. Anthropic has made a bold commitment to purchase $100 billion worth of Trainium chips. Jassy anticipates that Amazon's chip segment is on track to exceed $20 billion in revenue this year, with potential growth to around $50 billion if it operates independently serving external clients.