Amazon's Latest AI Processors Could Threaten Nvidia's Dominance: Will That Be the Case?

Amazon is making significant strides in AI technology by developing its latest AI processors and investing billions in the AI company Anthropic, aiming to reduce its dependence on Nvidia's chips.

A team in Austin, Texas, is working on Amazon's next-generation Trainium2 AI chip, Bloomberg reports. Amazon claims the new processor will be four times faster than its predecessor and offer three times more memory. The company has simplified the design by reducing the number of chips per unit from eight to two and replacing cables with circuit boards, making maintenance easier.

Currently, Amazon's core chip design engineer, Rami Sinno, is leading the team to accelerate the development of the second-generation AI chip, Trainium2. Sinno stated that their goal is to deploy these chips in data centers as soon as possible, with plans to complete testing and delivery by the end of the year.

Amazon has already begun deploying Trainium2 chips in data centers and expects to roll them out across multiple core data centers, including those in Ohio, soon. The company aims to create clusters of up to 100,000 Trainium2 chips.

Amazon shares jumped over 1% before the market opened, while Nvidia shares remained almost flat.

While Nvidia offers mature tools that allow customers to start quickly, Amazon's Neuron SDK software package is still new. Even with more user-friendly software, switching from Nvidia to Amazon could require hundreds of hours of development time, according to Bloomberg.

To address this gap, Amazon is investing up to $8 billion in Anthropic. In exchange, Anthropic will use more Amazon chips and work directly with AWS teams at Annapurna Labs, Amazon's chip division.

We're particularly impressed by the price-performance of Amazon Trainium chips, said Tom Brown, Anthropic's chief compute officer, [We've] been steadily expanding their use across an increasingly wide range of workloads.

Amazon spent $22.6 billion on property and equipment during the third quarter, up 81% from the year before, primarily due to investments in AI. CEO Andy Jassy announced that Amazon plans to spend $75 billion on capital expenditures in 2024 and expects an even higher figure in 2025. This bold move aims to help the e-commerce giant catch up with Microsoft, Meta, and other industry leaders.

It is a really unusually large, maybe once-in-a-lifetime type of opportunity, Jassy said. And I think our customers, the business, and our shareholders will feel good about this long term that we're aggressively pursuing it.