Important points
-
Amazon’s AI chip business is growing rapidly, which could provide another tailwind for the company.
-
This may be a threat to Nvidia, but the semiconductor leader has plenty of growth potential and a strong moat.
According to reports, Amazon(NASDAQ:AMZN) In addition to stacking these homegrown chips in its own data centers for the benefit of its cloud computing customers, the company is in early negotiations to sell its Trainium AI chips to external customers. This is not surprising. Amazon CEO Andy Jassy has already said the company could move in that direction. But one potential loss of Amazon’s decision to sell AI chips is Nvidia(NASDAQ:NVDA)will face further competition for dominance in the AI chip market. Should Nvidia shareholders be concerned?
Image source: Motley Fool.
Where to invest $1,000 now? Our team of analysts has revealed what they believe. Best 10 stocks Join Stock Advisor to buy now. View stocks »
Advantages of Amazon’s AI chips
There are several reasons why Amazon started designing its own chips in-house. First, to reduce exposure to Nvidia’s hardware. As a market leader in providing best-in-class graphics processing units (GPUs) for training and deploying artificial intelligence (AI) models, Nvidia has faced supply constraints at times. Amazon, and other hyperscalers for that matter, have found that custom-made chips can help get around this problem. Second, it is often more cost-effective for Amazon to rely on Trainium. According to the company, Trainium2 delivers 30% better price performance than comparable GPUs.
This means that the cloud computing giant can reduce expenses and increase profits thanks to the Trainium franchise. Other companies may be able to offer the same value proposition. Amazon said its AI chip division would have an annual operating rate of $50 billion if it were a standalone business. That’s not a huge number for a company with quarterly sales of well over $100 billion, but Amazon also said the division is growing at a triple-digit year-over-year rate, much faster than its other businesses. And if the AI boom continues, it could become a meaningful growth driver for Amazon. But what does this mean for Nvidia?
Nvidia should be fine
This explains why Amazon remains a major customer of Nvidia, despite the benefits of designing its own AI chips. Jassy said on the company’s first quarter earnings conference call.
Our most deployed AI chip is Trainium, and we continue to have a strong partnership with NVIDIA. We have a lot of respect for them, continue to place large orders with them, and will continue to be a partner for as long as we can foresee, and there will always be customers who want to run NVIDIA on AWS.
The lesson here is that Nvidia’s hardware is still the best and most versatile. The company also benefits from a wide moat thanks to the CUDA ecosystem.
As companies explore alternative AI chips, the rapidly growing AI industry should provide strong tailwinds for Nvidia while also supporting multiple winners. Additionally, Nvidia is leveraging significant new growth opportunities thanks to the rise of agent AI. With AI agents running on central processing units (CPUs), Nvidia estimates that standalone CPU revenue will reach $20 billion by the end of the year, beginning to drive toward a total addressable market of $200 billion.
The conclusion is: Even if Amazon’s AI chip business progresses, Nvidia will likely still reign supreme and continue to deliver superior financial results. As a result, semiconductor stocks continue to be bought.
Should you buy Nvidia stock now?
Before buying Nvidia stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors can buy right now…and Nvidia wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Netflix This list was created on December 17, 2004…if you invested $1,000 at the time of recommendation. That’s $393,037!* or when Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $1,280,627!*
Now, the important thing to note is that stock advisor Total average return is 913% — compared to the S&P 500’s 208%, an overwhelming market outperformance. Don’t miss our latest Top 10 list. stock advisorjoin an investing community built by retail investors, for retail investors.
See 10 stocks »
*Stock Advisor will return on June 24, 2026.
Prosper Junior Bakiny has positions at Amazon and Nvidia. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
