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AMZN

Amazon's AI Chips Are Driving Growth. Here's Why That Could Accelerate

May 12, 2026 — 02:20 pm EDT

Written by

Prosper Junior Bakiny for

The Motley Fool->

Key Points

- Demand for Amazon's AI chips remains high.

- Even so, the company won't topple Nvidia as the market leader.

- There are other reasons to invest in Amazon.

- These 10 stocks could mint the next wave of millionaires ›

Amazon (NASDAQ: AMZN) boasts a diversified business. The company has made it a habit of establishing itself as a leader in most of the markets where it operates. The list includes e-commerce, cloud computing, streaming, and digital advertising. Could the tech leader do the same in the market for artificial intelligence (AI) chips? Recent comments from the company's CEO, Andy Jassy, suggest that Amazon's AI chips are becoming a growth powerhouse, and there could be even more upside ahead. Here's what investors need to know.

Image source: The Motley Fool.

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A booming business

Amazon doesn't sell its chips to external customers. The company installs them in its data centers and allows its cloud customers to train or deploy AI models using its custom chips, which include Trainium and Graviton. Why wouldn't Amazon just use AI chips designed by the market leader, Nvidia (NASDAQ: NVDA)? The reality is that Amazon is likely one of Nvidia's biggest customers, but the e-commerce specialist can achieve several goals by also designing and offering its own hardware. First, as the market leader with the best-performing chips, Nvidia possesses tremendous pricing power.

Having to pay a premium price undercuts Amazon's margins. However, the company's internally developed chips could help address this issue. As Jassy said, Trainium2, for instance, offers 30% better price performance than comparable GPUs (Graphics Processing Units). Second, the incredible demand for Nvidia's AI chips means that the company is sometimes supply constrained, which could be a problem for Amazon. Once again, this is an issue that it can address by designing its own chips in-house.

Amazon is already seeing tremendous success with this strategy, and things are only getting better. The company pointed out that Trainium2 is pretty much fully booked, as is Trainium3, which hasn't been available that long. Trainium4, which isn't even available yet (and won't be for another 18 months), is already being reserved. Meanwhile, Amazon also expects margin expansion thanks to its Trainium chips. As Jassy said:

Trainium will save us tens of billions of dollars of capex each year and provide several hundred basis points of operating margin advantage versus relying on other chips for inference.

That's very good news for investors.

More growth ahead?

Amazon's efforts should continue paying off. The company said that within two years, there is a good chance it could start selling its chips to external customers rather than limiting them to its cloud customers. Earlier this year, Jassy estimated that if Amazon did that, its AI chip business would already boast a $50 billion annual run rate. It could be much higher in a couple of years, and if Jassy is right, it could become a meaningful contributor to Amazon's financial performance. There is another reason Amazon's design of its own AI chips could help boost its cloud business: it arguably strengthens the company's switching costs.

Amazon designed Trainium as an integrated stack combining custom AI chips, AWS (Amazon Web Services) software tools, and cloud infrastructure. As customers optimize AI workloads around Trainium and the AWS ecosystem, migrating to another cloud provider could become increasingly costly. Now, Amazon is unlikely to dethrone Nvidia as the market leader, even if it starts selling its chips to external customers. Nvidia's chips are still the top-performing ones.

Further, Amazon's projected margin expansion depends on whether demand remains high. Designing AI chips is capital-intensive, and if demand slows, the company's margins might decline. Even with these potential issues, Amazon remains an attractive stock, especially once we consider the totality of the business. Beyond its cloud computing segment -- whose sales growth climbed to a multi-year high in the first quarter -- Amazon's digital advertising business is also performing well, as are its core e-commerce operations.

The tech leader has attractive growth opportunities in these industrie