META has signed a multi-year agreement to deploy Amazon’s (AMZN) Graviton chip to power its AI capabilities.
Amazon’s Graviton is a central processing unit (CPU) rather than a graphics processing unit (GPU), the type of chip typically associated with AI workloads.
While enterprises still train and run AI models on GPUs, CPUs are back in fashion in data centers thanks to the rise of AI agents (Agent AI), semi-autonomous or fully autonomous bots that can perform actions on behalf of users.
AI agents can also retrieve data from emails, search the web for information and provide it automatically, and in certain circumstances make purchases. All of these tasks are performed more efficiently on the CPU rather than the GPU.
That’s boosting CPU sales after the chips fell out of favor early in the AI boom.
Intel (INTC) on Thursday reported better-than-expected first-quarter earnings and gave an upbeat outlook for the second quarter on the strength of demand for data center processors.
Nvidia (NVDA) is also getting deeper into the CPU game. In February, the company announced the first large-scale deployment of Grace CPU-only servers as part of its deal with Meta, and Nvidia plans to introduce Vera CPU-only servers in 2027.
AMD (AMD) also announced a similar deal with Meta that same month.
Amazon CEO Andy Jassy wrote in his annual shareholder newsletter last week that two of AWS’s largest customers had previously asked Amazon to buy out all of Amazon’s CPU capacity for 2026, but had to decline in order to provide the capacity to other Amazon customers.
In addition to the Graviton chip, Amazon offers the Trainium AI chip for AI training and inference.
The company already has agreements to provide capacity for its Trainium chips to OpenAI (OPAI.PVT) and Anthropic (ANTH.PVT).
Jassy said Amazon’s chip business has annual sales of $20 billion and is growing at a triple-digit rate year over year. But he 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.
Email Daniel Howley dhowley@yahoofinance.com. Follow him on X @Daniel Howley.
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