Amazon plans to reduce its reliance on Nvidia for AI chips

Nvidia’s biggest customer, Amazon.com, is settled to become a power in AI chips, hence reducing reliance on Nvidia. Amazon, being their biggest client, depends on them for a $100-billion-plus market for artificial intelligence chips.

The engineers are toiling to loosen Nvidia’s grip on providing the AI chips. They have confirmed that their goal is to build a system that can quickly turn Amazon data centers into humongous AI machines. They claim that they have put in years of work to create machine learning chips from scratch.

The e-commerce behemoth has a history of letting go of service providers as it ripped out many of the servers and network switches in its data centers and replaced them with custom-built hardware.

On the other hand, in the past two years, Nvidia transformed from a niche chipmaker to the main hardware supplier that enables generative AI. This distinction made the company the world’s largest by market value. This change will be a major blow on its end. 

Amazon’s massive chip-making effort

Rami Sinno, an executive, is the engineer in charge of chip design and testing. He is reported to have worked in the chip industry for decades. According to reports, he helped create the first two generations of Amazon AI semiconductors. Reports say that the Amazon chip lab in Austin, Texas, is packed with Amazon AI chips that compete with those of Nvidia.

The company is reported to have invented the cloud computing business fifteen years ago. Over time, Amazon started building the infrastructure that sustains it. 

The cloud machinery Amazon has built has positioned Chief Executive Officer Andy Jassy to open an AI supermarket. The supermarket will be selling tools for businesses that want to use third party models and chips for companies that train their own AI systems.

James Hamilton, a senior vice president, said, “Nvidia is a very, very competent company doing excellent work, and so they’re going to have a good solution for a lot of customers for a long time to come,” He also added, “We’re strongly of the view that we can produce a part that competes with them toe to toe.”

The e-commerce giant is going hard. They reported that they expect about $75 billion in capital spending in 2024, with the majority on technology infrastructure. Chief executive Andy Jassy said he expected the company to spend even more in 2025.

Amazon’s reasons for reducing reliance on Nvidia

Amazon is working on creating its own AI chips to reduce its reliance on Nvidia’s high-priced processors. Amazon executives explained that AI chips were already 40% cheaper to run when generating responses from AI models.

Dave Brown, vice president of compute and networking services at AWS, said, “The price of cloud computing tends to be much larger when it comes to machine learning and AI,” He added, “When you save 40% of $1,000, it’s not really going to affect your choice. But when you are saving 40% on tens of millions of dollars, it does.”

Dave Brown added that their goal is to be absolutely the best place to run Nvidia. He also argued that it’s “healthy to have an alternative.”

Should Nvidia be threatened by Amazon’s operations?

Nvidia’s GPU demand is usually very high and hard to get a hold of. Therefore, their prices cost tens of thousands of dollars apiece. 

Nvidia’s biggest customers are cloud providers like Amazon Web Services, Microsoft Corp’s Azure, and Alphabet Inc’s Google Cloud Platform. Reports say that they are all eager to reduce their reliance on, if not replace, Nvidia chips.

All three are cooking up their silicon, but Amazon, the largest seller of rented computing power, has deployed the most chips to date.

Nvidia GEAR, however, is said to have the ability to smoothly handle just about any AI task. The company is shipping its next-generation of chips to customers, including Amazon.

Nvidia is reported to have started promoting the products that will succeed it a year from now. Industry observers have predicted that Amazon isn’t likely to replace Nvidia anytime soon.

Land a High-Paying Web3 Job in 90 Days: The Ultimate Roadmap