Amazon’s AI Chip Demand Soars
Amazon CEO Andy Jassy announced that the demand for the company’s AI chips, particularly the Trainium chip, is “incredibly strong” and could potentially yield an annual revenue run rate of around $50 billion. This demand is attributed to the chip’s efficiency and scalability, making it appealing for tech companies aiming to enhance cost-effectiveness and profitability in their AI operations. If this vision materializes, it adds an exciting dimension to Amazon’s traditional revenue streams from its e-commerce and cloud businesses.
In 2022, Amazon reported $717 billion in revenue, and the addition of $50 billion would represent a 7% growth. However, this growth is likely to be largely tied to its Amazon Web Services (AWS) segment. Despite Amazon’s robust growth potential, its stock has only increased about 10% over the past year, lagging behind the S&P 500’s 20% gain during the same period. Currently, Amazon’s stock is trading at a low price-to-earnings multiple of around 30 compared to the average multiple of 38 in the Technology Select Sector SPDR ETF.
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