Andy Jassy is so bullish on Amazon's chips that he took a rare shot at Nvidia

In his latest letter to shareholders, Andy Jassy, the CEO of Amazon, enthusiastically highlighted the company’s advancements in AI chip technology, positioning Amazon as a formidable competitor to Nvidia. While Amazon continues to rely on Nvidia chips, it is also making significant strides with its own AI chips, known as Tranium. Jassy described the burgeoning demand for Amazon's chip business as "on fire," indicating a broader trend where companies are seeking to diversify their sources for AI chips. He noted, "Virtually all AI thus far has been done on NVIDIA chips, but a new shift has started." Although he acknowledged a strong partnership with Nvidia, he emphasized that customers are increasingly looking for better price-performance ratios. Drawing parallels to Amazon's previous disruption of Intel's dominance in the CPU market with its Graviton chip, Jassy stated, "The same story arc is unfolding in AI." He revealed that Amazon's latest chip, Tranium3, offers a 30-40% improvement in price performance compared to earlier models. Despite initial reports of Tranium 1 and 2 underperforming relative to Nvidia, Jassy mentioned that a significant portion of Tranium 4 has already been reserved ahead of its expected launch in 18 months. With an annual revenue run rate exceeding $20 billion for its chip division, Amazon is leveraging these chips in its own data centers to potentially reduce its $200 billion capital expenditure. Jassy noted, "At scale, we expect Trainium will save us tens of billions of capex dollars per year and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference." In addition to utilizing Tranium chips internally, Amazon also offers access to them via the cloud for clients like Anthropic and Uber. Looking ahead, Jassy hinted at the possibility of selling entire racks of these chips to third parties in the future. As of now, Amazon’s stock has seen a slight decline of 1.2% this year, but it has surged over 25% in the past year. Nvidia has not yet responded to inquiries regarding Jassy's comments.