TLDR
- Amazon CEO Andy Jassy dismissed AI bubble fears in his annual shareholder letter
- AWS AI services are generating over $15 billion in annualized revenue, roughly 10% of AWS total
- Amazon’s custom chip business has doubled its run rate to over $20 billion annually
- Jassy said the chip unit could generate $50 billion if it sold to third parties — comparable to Broadcom’s AI chip business
- Amazon projected $200 billion in capex for 2026, mostly on AI data centers
Amazon CEO Andy Jassy used his annual shareholder letter to push back hard on the idea that AI spending is getting out of hand.
“My strong conviction, at least for Amazon, is that the answers are no, no, and yes,” Jassy wrote, responding to questions about whether AI is over-hyped, whether it’s a bubble, and whether returns will be worthwhile.
The letter, published Thursday, was the first time Amazon has put a number on its AWS AI revenue. The business is generating more than $15 billion in annualized revenue, based on first-quarter performance.
That figure represents about 10% of AWS’s $142 billion revenue run rate. Investors and analysts had been waiting years for this disclosure.
Jassy said AI revenue is “ascending rapidly” and that AWS would be growing even faster if not for capacity constraints across the industry.
Amazon has committed to $200 billion in capital expenditure this year, mostly directed at AI infrastructure. That figure rattled investors earlier this year and fueled talk of an industry-wide spending bubble.
Jassy pushed back on that too. “We’re not investing on a hunch,” he wrote, adding that Amazon already has customer commitments for a large portion of the AWS capex planned for 2026.
Custom Chip Business Doubles
One of the bigger surprises in the letter was the update on Amazon’s in-house chip unit. The business — which covers Trainium AI chips, Graviton processors, and Nitro networking cards — has doubled its annualized revenue run rate to over $20 billion.
That’s up from the $10 billion figure Amazon disclosed alongside its fourth-quarter results.
Jassy went further, saying that if Amazon sold all the chips it produces this year to outside customers, the unit could generate $50 billion in annual revenue.
For context, Broadcom’s AI chip business is expected to bring in around $10.7 billion this quarter alone. Broadcom carries a market cap of $1.66 trillion, largely on the strength of that business.
Third-Party Sales on the Table
Jassy hinted that Amazon could eventually sell chips directly to outside buyers, putting it in competition with Nvidia and Broadcom — two companies Amazon currently buys from.
“There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future,” he wrote.
Google has already tried a version of this. It struck a deal last October to supply Anthropic with one million of its custom AI chips, worth tens of billions of dollars.
Reuters also reported last month that Jassy told an internal meeting that AWS could eventually hit $600 billion in annual revenue — double his earlier estimate — driven largely by AI.
Amazon has also cut around 30,000 jobs in recent months, trimming underperforming units and reducing pandemic-era headcount.
Amazon stock was up around 1.5% in premarket trading following the letter’s release.
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