Key Highlights
- CEO Andy Jassy rejected concerns about an AI investment bubble in his latest shareholder communication
- AWS artificial intelligence offerings now generate more than $15 billion on an annualized basis, accounting for approximately 10% of AWS revenue
- The company’s proprietary semiconductor division has achieved a $20 billion annual run rate, representing a 100% increase
- According to Jassy, external sales of these chips could potentially reach $50 billion — rivaling Broadcom’s AI semiconductor operations
- The e-commerce giant anticipates $200 billion in capital spending for 2026, primarily focused on artificial intelligence infrastructure
In his latest annual communication to shareholders, Amazon CEO Andy Jassy mounted a vigorous defense against growing skepticism surrounding artificial intelligence expenditures.
“My strong conviction, at least for Amazon, is that the answers are no, no, and yes,” Jassy stated, addressing concerns about AI hype, bubble risks, and return on investment prospects.
In Thursday’s published letter, Amazon provided its inaugural disclosure of AWS AI-related revenue figures. Based on first-quarter results, the division is generating annualized revenue exceeding $15 billion.
This represents roughly 10% of the total $142 billion AWS revenue run rate. Market observers and financial analysts have long anticipated this transparency.
The CEO emphasized that AI revenue is “ascending rapidly” and noted that AWS growth would accelerate further without industry-wide capacity limitations.
The tech giant has pledged $200 billion in capital investments this year, predominantly allocated to AI-related infrastructure. This substantial commitment sparked investor concern earlier in the year and intensified discussion about potential industry overinvestment.
Jassy directly challenged these worries. “We’re not investing on a hunch,” he explained, noting that Amazon has already secured customer commitments covering a significant portion of planned AWS capital expenditure through 2026.
Semiconductor Division Shows Explosive Growth
Among the letter’s most notable revelations was an update on Amazon’s proprietary semiconductor operations. The division — encompassing Trainium AI processors, Graviton chips, and Nitro networking components — has doubled its revenue run rate to exceed $20 billion annually.
This marks a significant jump from the $10 billion figure Amazon revealed during its fourth-quarter earnings announcement.
Jassy went even further, projecting that if Amazon marketed all its chip production to external customers this year, the division could generate $50 billion in annual revenue.
To put this in perspective, Broadcom’s AI semiconductor segment is projected to deliver approximately $10.7 billion this quarter alone. Broadcom commands a $1.66 trillion market capitalization, driven substantially by its chip business.
External Chip Sales Under Consideration
Jassy suggested that Amazon might eventually offer its semiconductors to external buyers, positioning the company as a competitor to Nvidia and Broadcom — currently Amazon’s chip suppliers.
“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 indicated.
Google has already explored a similar strategy. Last October, it announced an agreement to provide Anthropic with one million custom AI processors, representing a multi-billion dollar arrangement.
Reuters additionally reported last month that Jassy informed an internal gathering that AWS could ultimately achieve $600 billion in annual revenue — twice his previous projection — powered primarily by AI adoption.
Amazon has also eliminated approximately 30,000 positions in recent months, streamlining underperforming divisions and adjusting pandemic-era staffing levels.
Amazon shares traded approximately 1.5% higher in premarket activity following the shareholder letter’s publication.
