After sickening sell-offs in February and March. Amazon’s (NASDAQ: AMZN | AMZN Price Prediction) stock has suddenly bested the S&P 500 year to date.
One tipping point, which turned out not to be a problem, was when CEO Andy Jassey released his letter to shareholders. He said his company may become a major AI chip provider and compete with Nvidia (NASDAQ: NVDA) and AMD (NASDAQ: AMD). He added that Amazon’s AI revenue run rate in the first quarter was $15 billion. “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 commented.
In February, Jassey said his company would be part of the parade of megacap stocks and AI leaders, including OpenAI, in terms of massive AI capital expenditures. Amazon plans a $200 billion bet this year. It is still not clear where that comes from. Can Amazon be the bank, or does it need to turn to financiers?
There was a period not long ago when Amazon was considered an AI loser. It did not have the AI brands that Google, OpenAI, and Anthropic had. People thought the race for “downloads” and business adoption was already over.
Amazon’s play now appears to be hardware first. That does not mean it can’t use both Amazon.com and AWS to achieve broad adoption. The market has been nervous about how Amazon planned to make these work. Its stock price suggests that most of that anxiety is over for now.
The bold bet Amazon is making is that it plans to enter a hyper-competitive field. NVIDIA owns the high-end AI chip market. AMD has very small pieces. However, the primary challenge for both is supply in a market where supply, near-term supply, is critical to the construction of AI data centers.
Amazon was at the back of the AI pack just a few weeks ago. A lot of investors thought it would stay there. Not so, it would appear.
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