(Bloomberg Opinion) — Storm clouds are finally starting to clear over Amazon.com CEO Andy Jassy.
Jassy faces major challenges after taking over from Jeff Bezos. Regulators are standing behind him. The e-commerce business had expanded so much during the pandemic that it needed to be seriously reined in. Amazon's grocery store has been a disappointment. He laid off thousands of employees and shut down several projects.
Amazon Web Services, Golden Goose's cloud business that has long protected the company's profit margins, has come under pressure from cash-strapped companies seeking better deals during the pandemic. Revenue growth slowed. Then, when Microsoft Corp. partnered with OpenAI, there were concerns that companies would flock to the artificial intelligence offered by Amazon's largest cloud competitor, hurting AWS's market share.
Jassy, who was instrumental in AWS's rise as the division's CEO before taking the top job, remained calm. He assured investors that Amazon has been working on AI for years, long before ChatGPT ignited the tech industry with its promise of world-changing potential.
Amazon's message is that while OpenAI may have grabbed the headlines, investors should think of AWS as the Swiss Army knife of AI, allowing businesses to move sensitive data from one cloud provider to another. The idea was to run any number of cutting-edge AI models without having to worry about. another.
Amazon is already using Microsoft-developed Trainium and Inferentia chips to address concerns about the availability of computing power, which had increased the cost of acquiring Nvidia's hardware for AI training and inference. and manufactured their own hardware for those purposes. Others are rushing to catch up. Underscoring its seriousness about AI, Amazon announced it would buy a stake in leading AI maker Anthropic for his $4 billion and run its workloads on his AWS.
The company's first-quarter results released Tuesday showed those investments are starting to pay off, sparking an after-hours stock rally, rising as much as 6.5%. Jassie's reassurances are accurate and better times are on the horizon. AWS has seen accelerating revenue growth for his second consecutive quarter, Jassy said, with customer interest in AI contributing in large part. AWS' annual revenue now stands at $100 billion, of which his AI spending accounts for “several billions of dollars.” As Jassy predicted, clients who had withdrawn their cloud investments in pandemic “survival mode” are starting to see revenue. Accelerate spending and move more spend to the cloud. “I think at a macro level, people are moving towards newer efforts to modernize their infrastructure and try to create value from generative AI,” he said on a conference call to discuss the results.
Due to cost reductions and increased demand, AWS' operating margin for the quarter was 37.6%, a record high. Amazon's cloud business as a whole “has come back from a pretty tough year,” Jefferies analyst Brent Till said on Bloomberg TV. It's a high-margin recurring business like AWS. ”
A strong quarter meant Amazon could get away with vague announcements like saying it would “significantly” increase capital spending this year to cover the cost of its AI infrastructure. -The amount was not disclosed. This is different from Meta Platforms, which was punished. While the company says it will increase spending, Amazon is building powerful systems at multiple layers of the AI ”stack”: a bottom infrastructure layer for AI model builders, a middle layer for developers working with AI, and a top layer. Because they have a strong presence, they can get away with a larger investment. Consumer software applications such as chatbots.
All of this gives Amazon an excellent position in this fiercely competitive AI crowd. While the initial money is being made at the bottom and middle, there's no reason Amazon can't have a dominant presence in consumer AI as well. This week the company unveiled a full competition to Microsoft's code-writing AI assistant. Co-pilot.
In other words, Jassy controlled the agenda and made Amazon both sell shovels and mine gold.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Dave Lee is a U.S. technology columnist for Bloomberg Opinion. He was previously a correspondent for the Financial Times and BBC News.
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