AWS (formally known as Amazon Web Services) may have a new rival. This could be a huge problem because AWS is Amazon.com Inc.’s (NASDAQ: AMZN) earnings engine, and most analysts believe it is also the primary reason Amazon’s stock has done so well. The new competition could be from Nvidia Corp. (NASDAQ: NVDA), which has started renting servers for its artificial intelligence (AI) storage operation. Nvidia also provides chips to AWS.
24/7 Wall St. Key Points:
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Nvidia Corp. (NASDAQ: NVDA) has started renting servers for its AI storage operation.
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It could eventually overtake AWS as the largest cloud company in the world.
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According to The Information, based on documents filed with the U.S. Securities and Exchange Commission, “And in a little-noticed disclosure, it told investors that in the long run it could generate $150 billion in revenue from software and cloud services—more than either Nvidia or AWS currently generates annually.” This means there is a chance that Nvidia could eventually be the largest cloud company in the world. AWS is in first place in this sector, and Microsoft Corp. (NASDAQ: MSFT) is second. Nvidia also counts Microsoft as one of its largest customers.
To show the potential scale of the Nvidia plan, AWS had revenue of $27.5 billion in the most recent quarter, up 20% from the same quarter the year before. Operating income rose 49% to $10.4 billion. This is against Amazon’s total revenue for the quarter of $158.9 billion, up 11% from the same quarter in 2023. Amazon’s total net income for the entire company was $15.3 billion, up 54%. What is most notable is the AWS operating income was 68% of Amazon’s total. Over time, Amazon’s earnings have become increasingly dependent on AWS.
Amazon’s stock has done well this year. It is up 45% against an S&P 500 increase of 24%. Nvidia’s shares are up 160%. Nvidia is not a large player in data center-based AI. If that changes, Amazon will have a major headache.
Nvidia Price Prediction and Forecast
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