Technology
Amazon Will Challenge Nvidia as a Real Threat
Published:
Last Updated:
24/7 Wall St. Insights
- Amazon.com Inc. (NASDAQ: AMZN) reportedly will manufacture its own AI chips.
- That will put it in competition with Nvidia Corp. (NASDAQ: NVDA).
- Also: 2 Dividend Legends to Hold Forever.
The Financial Times reports that Amazon.com Inc. (NASDAQ: AMZN) will create and manufacture its own artificial intelligence (AI) chips, directly competing with market leader Nvidia Corp. (NASDAQ: NVDA). If Amazon has even modest success, it could undermine the advance of Nvidia’s stock, which has risen 193% this year. That gain has made Nvidia the most valuable publicly traded corporation in the world, with a market cap of almost $3.6 billion, more than Apple or Microsoft.
Nvidia’s stock price relies heavily on the fact that its position in the industry will not be seriously challenged, which means its quarterly revenue can continue to double yearly. Several companies, led by AMD, have tried such a challenge and have not come even close.
The Financial Times also reports, “Amazon is poised to roll out its newest artificial intelligence chips as the Big Tech group seeks returns on its multibillion-dollar semiconductor investments and reduce its reliance on market leader Nvidia.” Annapurna Labs, a chip company Amazon bought in 2015, will do most of the work. The effort could also slow Amazon’s massive capital spending, which is needed for its AI efforts. All the mega tech companies have had to make similar investments. And the Financial Times points out that the new chips may use less power. Powering AI chips are among the industry’s largest challenges.
Two other important issues are that Amazon does not publicly test its chips and that Nvidia cannot permanently hold its 90% market share position.
The Amazon initiative is a real threat.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
