Amazon's AI Chips Are Driving Growth. Here's Why That Could Accelerate | The Motley Fool

"Amazon doesn't sell its chips to external customers. The company installs them in its data centers and allows its cloud customers to train or deploy AI models using its custom chips, which include Trainium and Graviton. Why wouldn't Amazon just use AI chips designed by the market leader, Nvidia ? The reality is that Amazon is likely one of Nvidia's biggest customers, but the e-commerce specialist can achieve several goals by also designing and offering its own hardware."

"First, as the market leader with the best-performing chips, Nvidia possesses tremendous pricing power. Having to pay a premium price undercuts Amazon's margins. However, the company's internally developed chips could help address this issue . As Jassy said, Trainium2, for instance, offers 30% better price performance than comparable GPUs (Graphics Processing Units). Second, the incredible demand for Nvidia's AI chips means that the company is sometimes supply constrained, which could be a problem for Amazon."

"Once again, this is an issue that it can address by designing its own chips in-house. Amazon is already seeing tremendous success with this strategy, and things are only getting better. The company pointed out that Trainium2 is pretty much fully booked, as is Trainium3, which hasn't been available that long. Trainium4, which isn't even available yet (and won't be for another 18 months), is already being reserved."

Amazon builds AI chips for use in its data centers and for its cloud customers to train and deploy AI models. The chips include Trainium and Graviton, and Amazon does not sell them to external customers. Using market-leading Nvidia chips would likely raise costs because Nvidia’s pricing power and supply constraints can pressure Amazon’s margins and availability. Amazon’s internally developed chips aim to deliver better price performance, with Trainium2 offering 30% better price performance than comparable GPUs. Amazon is also benefiting from high demand, with Trainium2 fully booked and Trainium3 similarly booked. Trainium4 is already reserved despite not being available yet, and Amazon expects margin expansion as these chips scale.

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