NVIDIA's (NVDA.US) GPU replacement plan wins a big order! Amazon (AMZN.US) signs an AI chip agreement with Databricks

Amazon.com (AMZN.US) has reportedly signed a five-year deal with Databricks, a competitor to Snowflake (SNOW.US), allowing the data warehouse company to use Amazon's Trainium AI chips.

The deal, which focuses on Amazon's Trainium AI chips, offers a cheaper alternative to Nvidia's (NVDA.US) GPUs for companies looking to customize or build their own AI models.

Amazon said the five-year agreement (terms not disclosed) could help the company save money developing its own AI capabilities.

Naveen Rao, a Databricks executive, said the partnership with Amazon would make AI faster and cheaper for businesses, as it would allow Databricks to pass on the cost savings of using Amazon's AI chips instead of Nvidia's chips, which dominate the AI accelerator market.

Databricks hopes to pass on the cost savings from using Amazon chips to customers to breach Nvidia's moat.

As part of the deal, Databricks will also increase its use of Nvidia GPUs rented through AWS, Rao said. AWS created more than $1bn in revenue for Databricks and remains its fastest-growing cloud partner.

Dave Brown, an AWS executive, said Amazon's Trainium chips, which are designed specifically for AI tasks, could help businesses cut AI development costs by 40%.

Amazon released its second version of the Trainium chip in November 2023. The company also has a range of AI chips called Inferencia, which are used to build and leverage AI models.