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Written by Jennifer Saibil for The Motley Fool->
Amazon's AI business is growing by triple-digit percentages.
Although demand for its custom AI processors is strong, it's also maintaining its relationship with Nvidia.
The market is expecting accelerated sales growth for Nvidia.
Amazon (NASDAQ: AMZN) has developed quite the chip business. Its chip revenue increased 40% consecutively in the first quarter, and there was a triple-digit percentage increase in the run rate. As a stand-alone business, it's one of the three largest data center chip companies in the world.
But on the first-quarterearnings call CEO Andy Jassy reassured listeners that it maintains a strong relationship with Nvidia (NASDAQ: NVDA), the top artificial intelligence (AI) chip company. In fact, what he said implies great news for Nvidia shareholders.
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Jassy has said many times that Amazon's goal is to offer the broadest assortment of AI features and services. It's the top cloud infrastructure company in the world, with many major global names on its platform. But it also has a huge number of smaller clients that aren't looking to create the most sophisticated apps on the planet, and are looking for budget options for developers. To meet needs across the spectrum, it has designed its own Trainium, Graviton, and Nitro chips.
Amazon's artificial intelligence business is growing by triple-digit percentages, and it works with many of today's leading global brands. It sealed new deals with OpenAI, Meta Platforms, Nvidia, Southwest Airlines, the U.S. Army, and Bloomberg, among others, in the first quarter alone. When these kinds of brands build generative AI applications, they need powerful infrastructure.
To that end, Amazon is maintaining its relationship with Nvidia.
"While the largest number of AI chips we are bringing in are Trainium, we continue to have a deep partnership with Nvidia," Jassy said. "We have immense respect for them, continue to order substantial quantities, will be partners for as long as I can foresee, and we will always have customers who want to run Nvidia on AWS."
Though its chips are competitive for some uses, Amazon's custom hardware doesn't match Nvidia's powerful chips. And that's great news for Nvidia and its shareholders.
Wall Street is expecting Nvidia to book $79 billion in fiscal 2027 first-quarter sales, a 79% increase year over year. That would be an acceleration from its 73% growth in fiscal 2026's fourth quarter (which ended Jan. 25). Nvidia tends to beat Wall Street's expectations, and the stakes are high right now. The stock is rebounding from a dip it took earlier this year, and it's up 6% year to date, on par with the broader market. However, it's still 8% off the high it touched last year.
Nvidia reports its next set of quarterly results on May 20, and the excitement is building for another blowout update.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Nvidia. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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