Amazon Challenges Nvidia: Online Sales of AI Chips Trainium in Sight

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Key Takeaways

1Amazon Web Services plans to sell its AI chips, Trainium, aiming to compete with Nvidia in the data center market.

2Amazon's AI chief, Peter DeSantis, confirmed preliminary discussions to sell these chips to other companies.

3AWS could generate annual revenue of $50 billion from selling its chips, a figure that would rival Intel.

💡Why it matters — Amazon's entry into the AI chip market could shake up a sector dominated by Nvidia, providing new options for tech companies.

Amazon Aims to Compete with Nvidia in the AI Chip Market

Amazon Web Services (AWS) is preparing to ramp up its presence in the AI chip market, currently dominated by Nvidia. This initiative could pose a significant challenge to Nvidia, which is an undisputed leader in this field.

Peter DeSantis, Amazon's head of artificial intelligence, revealed to Bloomberg that AWS is considering selling its AI chip, named Trainium, to other companies for use in their data centers. Although DeSantis did not specify which companies might be interested in purchasing these chips, discussions are underway.

Ongoing Discussions for Chip Sales

According to information reported by TechCrunch, these discussions about chip sales are still in the preliminary stages. They follow an annual letter to shareholders from Andy Jassy, Amazon's CEO, published in early April, in which he mentioned the growing interest in the AI chips developed in-house by Amazon, to the extent of considering their sale.

In this letter, Jassy emphasized: “If our chip business were a standalone company, and sold the chips produced this year to AWS and other third parties, our annual revenue would be around $50 billion.” This illustrates the scale of demand for these chips and the potential for selling them to other companies in the future.

A Potential Competitor for Nvidia

While a potential revenue of $50 billion would not be enough to destabilize Nvidia, which is currently on a revenue trajectory of $326 billion, it would place Amazon on par with Intel in terms of revenue. This prospect could shift the balance of power in the AI chip market.

So far, AWS has chosen not to sell its AI chips for several reasons. One of the main reasons is that the revenue generated by these chips comes indirectly from the entire suite of cloud services that AWS offers, such as storage, security, networking, and monitoring services, in addition to the AI tokens billed directly to customers.

Demand Outstripping Supply

Amazon has also highlighted the strong demand for its chips, which are selling faster than they can be produced. In the same letter to shareholders, Jassy mentioned that the current capacity of the Trainium chip sold out almost instantly. Furthermore, the capacity of the next generation of chips, Trainium4, which will not be available for over a year, has also been exhausted. This occurred before AWS officially added OpenAI to the models it offered.

Selling these chips to other companies could mean that AWS would have to manage waitlists for its current customers unless it can ramp up production through its manufacturing partners like TSMC. However, this would require surpassing Nvidia to gain priority at TSMC, which has become the largest customer of the foundry, even surpassing Apple.

An Opening for Direct Sales

Doron Aronson, a spokesperson for AWS, confirmed that selling chips to other companies is a possibility being considered. “While we have historically declined requests for direct chip sales, Andy noted that it is entirely possible that we will sell racks to third parties in the future.”

Meanwhile, Jensen Huang, the founder and CEO of Nvidia, recently announced that he has discovered a new $200 billion market for Nvidia by selling CPUs for AI, in addition to GPUs. This indicates that Jassy's ambitions regarding chips, with a potential market of $50 billion, are directly aimed at competing with Nvidia.