If Amazon Web Services has its way, the cloud giant will move deeper into the Nvidia market, which could be one of the biggest challenges to Nvidia’s AI chip dominance we’ve seen so far.
Peter DeSantis, Amazon’s head of AI, told Bloomberg that AWS is in talks to sell its AI chip, Trainium, to other companies for use in data centers. DeSantis did not say which companies might be potential buyers for these chips.
The company told TechCrunch that these talks about chip sales are in the early stages. These stem from Amazon CEO Andy Jassy’s annual shareholder letter in early April, in which he said the company was considering selling its homegrown AI chips because they were so badly needed.
If our chip business were an independent business and sold the chips produced this year to AWS and other third parties (like other large chip companies), our annual run rate would be ~$50 billion. Demand for our chips is so high that there’s a good chance we’ll sell the racks to third parties in the future.
How big of a challenge will Amazon be for Nvidia? If the $50 billion competitor continues to deliver quarters similar to last quarter, it won’t exactly put pressure on Nvidia, which currently has $326 billion in revenue. But this is similar to Intel’s annual revenue.
AWS has resisted selling AI chips in the past for a variety of reasons. The biggest thing is that the money AWS is actually making on its chips is a waterfall effect. Yes, the company will charge customers directly for the AI tokens its chips process in the cloud, but it will also charge for a host of other services that companies need for their AI apps, such as storage, security, networking, and monitoring services.
Just as importantly, Amazon is touting that its chip capacity is selling out faster than it can produce it. Jassy said in the same letter to shareholders in April that current Trainium chip capacity sold out almost instantly. There is also capacity for the next Trainium 4, but it will be more than a year before it is available, he said. This was before AWS officially added OpenAI to the models it was offering.
So selling its chips to other companies means it will likely have to keep its current customers on a waiting list, unless it can somehow produce surplus chips through a manufacturing partner like TSMC. But to do that with TSMC, which recently replaced Apple as the foundry’s biggest customer, it will need to miraculously get Nvidia out of the way.
AWS spokesperson Doron Aronson (who recently treated me to a private tour of AWS chip design facilities) also confirmed that AWS may sell these chips. “Although the company has so far turned down requests to sell chips directly, Andy said there is a good chance that the company will sell racks of chips to third parties in the future.”
Nvidia founder and CEO Jensen Huang recently declared that he has discovered an entirely new $200 billion market for Nvidia in selling CPUs for AI, not just GPUs. This brings us into the realm of Intel and AMD. Jassy clearly has his own chip ambitions. It’s a $50 billion market that impacts Nvidia’s world more directly.
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