Amazon’s AI business is growing faster than AWS did

Amazon’s third-quarter results offered some interesting glimpses at how AI is not only growing the company’s white-hot cloud-computing business, but also how the company is using the technology to advance its core businesses.

AI cloud-computing demand is huge

Amazon’s AWS has long been a dominant player in cloud computing, and they were well placed to reap the benefits of the generative-AI boom starting around 2023, when tools like OpenAI’s ChatGPT and image-generation apps like Midjourney came along. Amazon CEO Andy Jassy said the AI computing business is growing at a faster rate than AWS.

“Our AI business is a multibillion-dollar business; it’s growing triple-digit percentages year over year and is growing 3x faster at its stage of evolution than AWS did itself,” Jassy said in the Q3 earnings call.

When asked about AI-computing chip constraints, which have been plaguing the industry due to the incredible demand, Jassy said everyone in the business is dealing with the same problem. Jassy said, “I believe we have more demand that we could fulfill if we had even more capacity today.”

Jassy touted Amazon’s strong relationship with AI-chip leader Nvidia, saying, “We have a very deep partnership with Nvidia. We tend to be their lead partner on most of their new chips. We were the first to offer H200s in EC2 instances. And I expect us to have a partnership for a very long time that matters.”

Amazon is also getting into the custom-silicon business by building its own AI chips, such as “AWS Trainium,” which is tailored to generative-AI training.

The company has spent $51.9 billion on capital expenditures so far this year, the majority of which is fueled by demand for Amazon’s AI-computing infrastructure. Amazon CFO Brian T. Olsavsky said the company plans on spending a total of about $75 billion on capital expenditures in 2024.

New warehouse robotics are very speedy

Amazon recently opened its 12th-generation fulfillment-center design at a building in Shreveport, Louisiana.

“This is the first facility that incorporates our newest robotics inventions to simplify stowing, picking, packing, and shipping processes,” Jassy said. “Thus far, this new design reduces fulfillment-processing time by up to 25%, increases the number of items we can offer for same-day or next-day delivery, and is expected to drive a 25% improvement in our cost to serve during peak within this next-generation facility.”

Alexa, what happened to you?

When Amazon rolled out Alexa in 2014, it delivered some truly futuristic technology to millions of people for the first time.

“When we first were pursuing Alexa, we had this vision of it being the world’s best personal assistant and people thought that was kind of a crazy idea,” Olsavsky said.

But 10 years later, Alexa has been left in the dust by a horde of incredibly powerful conversational AI agents. But Amazon thinks its Alexa devices offer a beachhead from which it can catch up in the AI wars.

Noting that there are around 500 million Alexa devices out there today, Olsavsky said, “We have a really broad footprint where we believe if we re-architect the brains of Alexa with next-generation foundational models, which we’re in the process of doing, we have an opportunity to be the leader in that space.”

This week Bloomberg reported that this is turning out to be a taller task than the company expected, saying that company insiders have said the next-gen Alexa has been repeatedly postponed and has now slipped into 2025.

While most AI chatbots today are good at retrieving and summarizing information for users, few are acting as “agents” capable of taking actions on behalf of users. Olsavsky hinted that may be something the company has planned for the new iteration of Alexa.

“I think that the next generation of these assistants and the generative-AI applications will be better at not just answering questions and summarizing, indexing, and aggregating data, but also taking actions. And you can imagine us being pretty good at that with Alexa,” Olsavsky said.

Generative AI a “once-in-a-lifetime” opportunity

Overall, Amazon is going all in on AI from the front end — where consumers actually use AI-powered tools — to the back end, where the models are trained, built, and hosted in the cloud.

“It is a really unusually large, maybe once-in-a-lifetime type of opportunity. And I think our customers, the business, and our shareholders will feel good about this long-term that we’re aggressively pursuing it,” said Jassy.