Amazon hopes to challenge Nvidia more directly by selling its own AI chips

If Amazon Web Services succeeds in its goal, the cloud giant will penetrate deeper into Nvidia’s market, in what could be one of the biggest challenges to Nvidia’s AI chip dominance we’ve seen yet.

Peter DeSantis, Amazon’s head of AI, told Bloomberg that AWS is in talks to sell its Trainium AI chip to other companies for use in data centers. DeSantis declined to identify companies that could be buyers of these chips.

The company tells TechCrunch that such talk about selling chips is still in its early stages. It stems from Amazon CEO Andy Jassy’s annual shareholder letter in early April, in which he said the company’s homegrown AI chips were so desirable that he was considering selling them:

If our chip business were an independent business, and we sold the chips produced this year to AWS and other third parties (as other leading chip companies do), our annual run rate would be about $50 billion. There is so much demand for our chips that it is very possible that we will sell shelves of them to third parties in the future.

How big of a challenge could Amazon pose for Nvidia? The $50 billion competitor won’t completely destroy Nvidia — which currently has a revenue run rate of $326 billion — if it continues to deliver quarters like last one. But it’s similar to Intel’s annual revenue.

AWS has so far resisted selling its AI chips for many reasons. The biggest is that the money AWS actually makes from its chips is the waterfall effect. Sure, it charges customers directly for the AI ​​code that those chips process on its cloud, but it also charges for a host of other services that companies need for their AI applications, including storage, security, networking, and monitoring services.

Just as importantly, Amazon has touted that its chip capacity is selling faster than it can produce it. In the same April shareholder letter, Jassy said existing Trainium chip capacity was sold out almost immediately. He also said we have the ability to run the next version, Trainium4, which won’t be available for more than a year. This was before AWS officially added OpenAI to the models it was serving.

So selling its chips to others means it will likely have to leave existing customers on waiting lists, unless it can somehow manufacture surplus chips through its manufacturing partners like TSMC. But it would have to miraculously push Nvidia out of the way to do so with TSMC, which recently replaced Apple to become the foundry’s largest customer.

AWS spokesperson Doron Aronson (who hosted me during a recent private tour of the AWS chip design facility) also confirmed that AWS may sell these chips. “While we have historically declined requests to sell chips directly, Andy noted that it is very possible that we will sell shelves of them to third parties in the future.”

So, while Nvidia founder and CEO Jensen Huang recently announced that he has found a new $200 billion market for Nvidia in selling AI CPUs, not just GPUs — thus moving into Intel and AMD territory — Jassy clearly has his own chip ambitions: a $50 billion market that would put the elbow squarely in Nvidia’s world.