Will Amazon's AI Chip Business Be a Threat to Nvidia?

Prosper Junior Bakiny, The Motley Fool

Wed, June 24, 2026 astatine 4:50 AM CDT 4 min read

According to reports, Amazon (NASDAQ: AMZN) is successful aboriginal talks to merchantability its Trainium AI chips to outer customers, alternatively than conscionable stacking its ain information centers with these in-house-made chips for the payment of its unreality computing clients. This shouldn't travel arsenic a surprise: Amazon's CEO, Andy Jassy, had already said that the institution could beryllium moving successful that direction. However, 1 imaginable loser from Amazon's determination to merchantability its AI chips is Nvidia (NASDAQ: NVDA), which volition present look much contention for dominance successful the AI spot market. Should Nvidia's shareholders beryllium worried?

Missed Nvidia successful 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" awesome flashed for a little-known chipmaker called Nvidia. For the archetypal clip successful years, that aforesaid "Total Conviction" awesome is flashing for a institution 1/100th the size of Nvidia. Continue »

The vantage of Amazon's AI chips

Amazon started designing its ain chips in-house for respective reasons. First, to assistance alteration its vulnerability to Nvidia's hardware. As the marketplace person successful offering best-in-class GPUs (Graphics Processing Units) for grooming and deploying artificial quality (AI) models, Nvidia has sometimes faced proviso constraints. Amazon, and, for that matter, different hyperscalers, person recovered that custom-made chips tin assistance them sidestep this issue. Second, for Amazon, relying connected Trainium is often much cost-effective. According to the company, Trainium2 offers 30% amended terms show than comparable GPUs.

That means the unreality computing elephantine tin trim expenses and boost margins acknowledgment to its Trainium franchise. It could connection the aforesaid worth proposition to different companies. Amazon has said its AI spot portion would person an yearly tally complaint of $50 cardinal if it were a stand-alone business. That's not a batch for a institution that generates good implicit $100 cardinal successful quarterly sales, but Amazon besides said this conception is increasing astatine triple-digit year-over-year rates, overmuch faster than the remainder of the business. And if the AI roar continues, it could go a meaningful maturation operator for Amazon. But what does each of this mean for Nvidia?

Nvidia should beryllium conscionable good

It is telling that contempt the vantage of designing its ain AI chips, Amazon continues to beryllium a large Nvidia customer. As Jassy said during the company's first-quarter net league call:

While the largest fig of AI chips we are bringing successful are Trainium, we proceed to person a heavy concern with NVIDIA. We person immense respect for them, proceed to bid important quantities, volition beryllium partners for arsenic agelong arsenic I tin foresee, and we volition ever person customers who privation to tally NVIDIA connected AWS.