Amazon’s Quietest Business is Why I Keep Buying Hand Over Fist

I keep hitting the buy button on Amazon (NASDAQ:AMZN | AMZN Price Prediction) for a reason that barely makes the headlines: the custom silicon business sitting inside AWS. Everyone argues about retail margins and NVIDIA‘s (NASDAQ:NVDA) next quarter while I quietly load up on the company that is building its own chips at a scale most investors have not priced in.

Here is what pulled me back to the buy button this quarter. Andy Jassy told analysts on the Q1 2026 call that Amazon’s chip business is running at over $20 billion annually and growing triple-digit percentages year over year. If those chips were sold standalone, the annual revenue run rate would be $50 billion, which Jassy says makes it one of the top three data center chip businesses in the world. A top-tier semiconductor company is hiding inside a retailer’s segment reporting, and the market is treating it like a footnote.

The data-grounded case is straightforward. First, the commitments are real. Amazon has over $225 billion in Trainium revenue commitments, with Anthropic, OpenAI, Meta, and Uber signed on. Second, the price-performance edge is durable. Trainium2 delivers about 30% better price performance than comparable GPUs and is largely sold out, and Trainium3 is 30% to 40% more price performant than Trainium2, with much of Trainium4 already reserved. Third, this is showing up in the P&L. AWS grew 28% year over year in Q1 2026 to $37.587 billion, the fastest pace in 15 quarters, at a 37.7% operating margin. Jassy said Trainium should eventually deliver several hundred basis points of operating margin advantage versus buying chips elsewhere.

Why This Instead of NVIDIA

I own the picks-and-shovels play by owning Amazon. NVIDIA trades at a trailing P/E of 31, a price-to-sales of 20, and a price-to-book of 25. Amazon trades at a P/E of 35 for the entire company, and the market gives roughly zero credit to the chip unit at semiconductor multiples. NVIDIA is priced for perfection. Amazon is priced as if the chips do not exist. When Wall Street starts valuing the silicon at anything close to peer multiples, I want to already be inside.

The Real Risk

The check has to clear. Free cash flow trailing twelve months fell 95% to $1.2 billion because property and equipment spending jumped $59.3 billion year over year. Long-term debt has climbed to $119.1 billion from $65.6 billion. The 2026 CapEx plan is roughly $200 billion. If AI demand slows, that spending stops looking visionary and starts looking indulgent.

I keep buying anyway because the balance sheet absorbs it. Interest coverage sits at 35.2x. Return on equity is 22.3%. Operating cash flow was $139.51 billion in FY 2025. Jassy said AWS backlog is $364 billion, before Anthropic’s $100 billion deal. The customers are already committed for years of the capacity being built.

The stock is up 11.96% over the past year and 578.98% over ten years. Analysts sit at 62 buy ratings, 4 holds, zero sells. My buy button stays active because a chip company is being built inside my position while I pay retailer multiples.

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