AMZN Stock Jumps Overnight: AWS Sticks With Nvidia Bet Even Amid Surging Demand For In-House Chips

• The company’s Trainium chip business has hit an annual revenue run rate above $20 billion and could approach $50 billion when internal deployments are included.
• Amazon reaffirmed its long-term partnership with Nvidia and said it will continue to order substantial volumes of chips from the company.
• While total company revenue increased 17% to $181.5 billion, operating income climbed to $23.9 billion.

Shares of Amazon.com, Inc. (AMZN) rose nearly 3% in overnight trading late Wednesday after the company said that its cloud unit Amazon Web Services (AWS), its biggest profit driver, will continue buying substantial volumes of chips from Nvidia even as demand surges for its in-house AI processors.

AMZN stock is on track to post its best month since July 2022.

Amazon’s AWS Posts Fastest Growth In Three Years

First-quarter (Q1) revenue for AWS climbed 28% from the previous year to hit $37.6 billion, marking its fastest growth rate in over three years on the back of increased spending on AI and cloud migrations.

“We’ve never seen a technology grow as rapidly as AI,” CEO Andy Jassy said on the earnings call late Wednesday.

Amazon said its AI services are already generating more than $15 billion in annualized revenue after just three years. The company also noted that higher AI usage typically boosts demand for core cloud services.

“To put our growth in perspective, 3 years after AWS launched, we had a $58 million revenue run rate. In the first 3 years of this AI wave, AWS' AI revenue run rate is over $15 billion, nearly 260x larger,” Jassy said. 

Amazon AI Chip Run Rate Tops $20B

Meanwhile, Amazon highlighted strong adoption across its Trainium chips. Its chip business has reached an annual revenue run rate above $20 billion and could reach $50 billion if internal deployments were counted similarly to those of external chip vendors.

Demand across next-gen Trainium chips continues to pick up pace. Trainium 2 capacity is largely sold out, Trainium 3 is nearly fully subscribed, and Trainium 4, which is still about 18 months from broad availability, has already been reserved, the company said. 

“The uniquely strong price performance that Trainium offers is compelling to our external and internal customers,” Jassy said. He also expects Trainium chips to save the company “tens of billions of dollars” of capex every year.

Amazon’s AWS Sticks With Nvidia GPUs

Despite rising deployment of its in-house chips, Amazon said Nvidia GPUs (graphics processing units) will remain a key part of its infrastructure stack as customers continue to run diverse training workloads across the AWS platform.

“While the largest number of AI chips we're bringing in are Trainium, we continue to have a deep partnership with NVIDIA. We have immense respect for them, continue to order substantial quantities. We'll be partners for as long as I can foresee, and we'll always have customers who want to run NVIDIA on AWS,” Jassy said.

The continued commitment follows AWS plans from last month to purchase 1 million Nvidia GPUs through 2027 as part of a broader infrastructure deal that also includes Spectrum networking and ConnectX components for large-scale AI deployments.

Amazon Ramps Up Capex To $200B

In Q1, Amazon sharply increased infrastructure investment to support the heavy enterprise demand for AI. Property and equipment spending totaled $151 billion over the trailing 12 months through March 31, up $57.9 billion from a year earlier, while capex alone hit $44.2 billion.

The company reiterated plans to spend $200 billion this year, largely on data centers optimized for AI services. It said that much of the new capacity is already driven by customer commitments and expected to generate “compelling” returns.

Amazon has recently struck infrastructure deals with major model developers, including OpenAI and Anthropic, which together have committed to spending over $100 billion on AWS over the coming years.

“We’re unusually well positioned for the inflection that we’re seeing,” Jassy said.

Advertising Growth Boosts AMZN Revenue

Outside of cloud services, Amazon’s advertising business remained a strong contributor to profitability, with revenue rising 24% from a year ago to $17.2 billion. Total company revenue also increased 17% to $181.5 billion, beating analyst expectations, while operating income rose to $23.9 billion from $18.4 billion a year earlier.

Online store sales climbed 12% to $64.3 billion as the company continued expanding same-day delivery coverage and logistics efficiency across its retail network.

How Do Retail Traders Feel About AMZN?

On Stocktwits, retail sentiment for AMZN jumped to ‘extremely bullish’ from ‘neutral’ levels after the quarterly results amid a 472% surge in 24-hour message volume.

One user said, “Amazon was flat for about 5 years while it was reinvesting wisely and growing like no company its size in history so you tell us.”

Another user said, “Why anyone would do anything but own Amazon is beyond me. One of the top 5 businesses on the planet.”

AMZN stock has risen about 14% so far this year, making it the best performer among the “Magnificent Seven” mega-cap tech peers. 

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