Amazon (AMZN) CEO Andy Jassy released his annual shareholder newsletter Thursday, outlining the company’s approach to AI and hinting that Amazon is considering selling its AI processors to third parties to increase competition from Nvidia (NVDA) and AMD (AMD).
Jassy said he doesn’t think the technology will be overhyped or a bubble, but rather that the margins and return on invested capital will be “attractive.” He said his belief stems from the rapid adoption of AI and the rapidly increasing revenue of Amazon’s AWS division.
According to Jassy, AWS’ AI revenue was over $15 billion as of Q1 2026 and continues to grow. He further said that despite plans to add 3.9 gigawatts of capacity in 2025 and double it by 2027, the company remains capacity constrained, although the business could grow faster.
Jassy said two large AWS customers asked if they could purchase all of the company’s custom CPU Graviton capacity in 2026. However, the company says it disagrees with the move because it still needs to provide CPU capacity to other customers.
The CEO also criticized Nvidia, saying that while Amazon continues to use its chips, customers are demanding better “price/performance.” Jassy said this is why Amazon’s custom AI GPU Trainium2 chips are sold out, while Trainium3 is “nearly full” despite starting shipping in early 2026.
“Having our own highly sought-after AI chips opens up many possibilities, but perhaps none more so than being able to reduce costs and secure the economics of AWS for our customers,” said Jassy. “At scale, we expect Trainium to save us tens of billions of dollars in annual capital investment and deliver hundreds of basis points in operating margin advantages compared to relying on other companies’ chips for inference.”
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Amazon’s chip business has annual sales of $20 billion and is growing at a triple-digit rate year over year, the CEO said. But Jassy said that amount is an underestimate because the company only monetizes chips through AWS EC2 services.
If it were a standalone business, Amazon’s chip revenue would have a run rate of about $50 billion, he said.
“The demand for our chips is so high that there’s a good chance we’ll sell the racks to third parties in the future,” Jassy said.
However, none of Amazon’s AI efforts come cheap. In February, the company announced plans to spend $200 billion in capital investment in 2026 alone as part of its expansion efforts. Since the announcement, Amazon’s stock price has fallen 7%.
