Key Highlights
- CEO Andy Jassy refutes concerns about AI investment bubble in annual letter to shareholders
- AWS AI business now exceeding $15 billion in annual revenue, approximately 10% of total AWS income
- In-house chip division has doubled its annual run rate to surpass $20 billion
- According to Jassy, chip unit could reach $50 billion revenue if sold externally — matching Broadcom’s AI chip scale
- Company forecasts $200 billion capital expenditure for 2026, primarily targeting AI infrastructure
In his latest annual shareholder letter, Amazon CEO Andy Jassy mounted a vigorous defense against growing concerns that artificial intelligence investments have spiraled beyond reasonable limits.
“My strong conviction, at least for Amazon, is that the answers are no, no, and yes,” Jassy declared, addressing whether AI hype has exceeded reality, whether a bubble exists, and whether investment returns will justify the spending.
Thursday’s letter marked a milestone for Amazon, as the company disclosed specific AWS AI revenue figures for the first time. The division now generates over $15 billion in annualized revenue based on first-quarter results.
This represents roughly 10% of AWS’s total $142 billion annual revenue run rate. The disclosure answers questions analysts and investors have been asking for years.
According to Jassy, AI revenue continues to “ascend rapidly,” with growth only limited by industry-wide capacity constraints rather than demand.
The e-commerce giant plans to invest $200 billion in capital expenditures this year, with the majority allocated to AI infrastructure development. This commitment previously unsettled investors and sparked broader industry discussions about excessive spending.
Jassy firmly rejected such concerns. “We’re not investing on a hunch,” he explained, noting that Amazon has already secured customer commitments covering a significant portion of AWS capex planned through 2026.
In-House Chip Division Experiences Explosive Growth
Among the most notable revelations in Jassy’s letter was the performance update on Amazon’s proprietary chip division. The segment — encompassing Trainium AI processors, Graviton chips, and Nitro networking components — has doubled its annual revenue run rate to exceed $20 billion.
This represents significant growth from the $10 billion figure Amazon reported during its fourth-quarter earnings announcement.
Jassy suggested an even more ambitious scenario: if Amazon sold its entire chip production to external customers this year, the division could generate $50 billion annually.
To put this in perspective, Broadcom’s AI chip segment alone is projected to deliver approximately $10.7 billion this quarter. Broadcom commands a market capitalization of $1.66 trillion, powered significantly by its chip business.
External Chip Sales Under Consideration
The CEO suggested Amazon may eventually offer its chips to external buyers, potentially competing directly with Nvidia and Broadcom — ironically, two companies that currently supply Amazon.
“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,” Jassy stated.
This strategy has precedent. Google executed a similar approach last October when it agreed to provide Anthropic with one million custom AI chips, a deal valued in the tens of billions.
Additionally, Reuters reported last month that Jassy informed an internal meeting that AWS could eventually achieve $600 billion in annual revenue — double his previous projection — with AI serving as the primary growth driver.
The company has also streamlined operations recently, eliminating approximately 30,000 positions by cutting underperforming divisions and reducing headcount added during the pandemic expansion.
Following the letter’s publication, Amazon shares gained approximately 1.5% in premarket trading.
