Amazon in talks to sell AI chips to power third-party data centres, taking on Nvidia

Amazon is considering selling its Trainium AI chips to other companies, a move that could open a new business beyond AWS and put it in more direct competition with Nvidia. The company says demand for its in-house AI hardware is already so strong that chip sales could become a $50 billion business.

In Short

• Amazon may sell Trainium AI chips to third-party data centres
• CEO Andy Jassy sees a potential $50 billion chip business
• The move could make Amazon a stronger rival to Nvidia in AI hardware market

Amazon is preparing for a bigger role in the artificial intelligence hardware market. The company is exploring the possibility of selling its custom-built AI chips to other businesses, a move that could see it compete more directly with Nvidia, the dominant player in the AI chip industry.

The plan revolves around Amazon’s Trainium chips, which were originally developed for use inside Amazon Web Services (AWS). Speaking to Bloomberg, AWS AI chief Peter DeSantis confirmed that the company is in discussions about allowing other organisations to use Trainium chips in their own data centres. While he did not reveal the names of potential customers, the comments offer a glimpse into Amazon’s growing ambitions in the AI infrastructure space.

The idea is still at an early stage, according to Tech Crunch. However, it is not the first time Amazon executives have hinted at such a possibility. In his annual shareholder letter earlier this year, Amazon CEO Andy Jassy said demand for the company’s AI chips had become so strong that selling them externally was being actively considered.

Jassy claimed that if Amazon's chip division operated as a standalone business and sold its chips to AWS as well as outside customers, it could generate an annual revenue run rate of around $50 billion. He added that demand was high enough that Amazon may eventually sell entire racks of AI systems to third parties.

Demand for Trainium chips remains extremely high

One of the biggest challenges facing Amazon is that its own customers are already consuming most of the available chip supply. AWS has repeatedly said that demand for Trainium chips has outpaced production capacity.

According to Jassy, available capacity for the current generation of Trainium processors was snapped up almost immediately. He also revealed that capacity for the upcoming Trainium4 chips, which are still more than a year away from launch, has already been reserved.

This creates a difficult balancing act for Amazon. Selling chips directly to outside companies could mean diverting supply away from AWS customers unless production increases substantially. The company relies on manufacturing partners such as TSMC to build these chips, and securing additional manufacturing capacity is not an easy task given the intense global demand for advanced AI hardware.

AWS spokesperson Doron Aronson also acknowledged that Amazon is seriously considering the idea. “While we’ve historically declined requests to sell chips directly, Andy noted it’s quite possible we’ll sell racks of them to third parties in the future,” he said.

A new challenge to Nvidia's dominance

Even if Amazon succeeds in creating a $50 billion chip business, Nvidia would remain far larger. Nvidia is currently operating at an annual revenue pace of more than $326 billion, thanks to explosive demand for its AI GPUs.

Still, a potential $50 billion chip business would instantly place Amazon among the world's major semiconductor players. For comparison, that figure is roughly similar to Intel’s annual revenue.

The move would also represent a change in strategy for AWS. Until now, Amazon has primarily benefited from using its chips inside its cloud platform. Beyond charging customers for AI computing power, AWS also earns money from storage, networking, security and monitoring services that businesses need when running AI applications.

Despite that, Amazon appears willing to explore a better opportunity as competition in cloud computing intensifies. AWS remains the largest cloud infrastructure provider globally, but rivals Microsoft Azure and Google Cloud are investing aggressively in AI services and partnerships with leading AI companies.

AWS recently reported strong momentum in its cloud business. Revenue climbed 28 per cent year-on-year to $37.59 billion during the first quarter, helped by growing AI demand, deeper ties with Anthropic and preparations to support OpenAI services.

- Ends