Key Takeaways
- In his yearly letter to shareholders, Amazon CEO Andy Jassy refuted concerns about an AI investment bubble, emphasizing actual revenue generation.
- AWS’s AI offerings reached an annualized revenue run rate exceeding $15 billion during the first quarter of 2026.
- The company’s proprietary semiconductor division — featuring Trainium and Graviton chips — achieved an annualized revenue run rate surpassing $20 billion, up from $10 billion previously.
- According to Jassy, Amazon might begin selling chip racks externally, which could create a $50 billion annual semiconductor revenue stream.
- Shares of AMZN increased 5.6% to reach $233.65 on Thursday, marking the largest daily gain since October 31, 2025.
In his annual communication to shareholders, Amazon CEO Andy Jassy directly confronted skeptics. The Thursday-released letter challenged assertions that major technology companies are overspending on artificial intelligence — and investors took notice.
Shares of AMZN advanced 5.6% to settle at $233.65 on Thursday. This represented the stock’s strongest single-session showing since October 31, 2025, when it surged 9.58%. The performance also placed it at the top of the Dow Jones index for the trading day.
While Jassy’s communication addressed numerous topics, two revenue figures captured particular attention: $15 billion and $20 billion.
Based on first-quarter results, AWS AI offerings are now delivering an annualized revenue run rate topping $15 billion. This marks the first instance Amazon has disclosed a concrete figure for this segment. By comparison, Microsoft announced in January that its AI operations had surpassed a $13 billion annualized run rate in late 2024.
While these metrics aren’t perfectly comparable — run-rate calculations vary based on timing — both demonstrate that AI investments at major cloud providers are converting into tangible revenue streams.
Customer Commitments Support AWS Investment Strategy
Amazon has outlined $200 billion in capital spending for 2026, with the majority allocated to AI infrastructure. This substantial investment raised eyebrows among certain investors earlier in the year.
Jassy addressed these concerns directly. “We’re not investing on a hunch,” he stated. According to him, a significant share of AWS’s 2026 capital expenditure is already backed by customer agreements, with revenue expected to materialize in 2027 and 2028.
“Of the AWS capex we expect to spend in 2026, much of which will be monetized in 2027-2028, we already have customer commitments for a substantial portion of it,” Jassy wrote.
Brian Mulberry, chief market strategist at Zacks Investment Management, characterized the AI run-rate disclosure as “a strong validation that AWS is successfully turning the AI boom into real, high-growth revenue.”
The $200 billion investment plan exceeds comparable spending from Microsoft and Alphabet during the same timeframe.
Amazon’s Semiconductor Operations Could Challenge Nvidia and Broadcom
Another major revelation in Jassy’s communication concerned Amazon’s chip operations. The company’s internal semiconductor division — encompassing Trainium AI processors, Graviton chips, and Nitro networking components — has reached an annualized revenue run rate exceeding $20 billion. This represents a doubling from the $10 billion figure reported with fourth-quarter earnings, showing rapid expansion.
Jassy suggested even greater possibilities, indicating that external sales of these chips could generate $50 billion annually. “There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future,” he stated.
Should this strategy materialize, Amazon would enter direct competition with Nvidia and Broadcom in the AI semiconductor market. Broadcom’s AI chip division is projected to produce approximately $10.7 billion in revenue during the current quarter alone. Broadcom’s valuation currently stands at $1.66 trillion, driven primarily by its chip business.
Amazon has already initiated discussions with OpenAI. The company committed to a $50 billion investment in the ChatGPT creator, with OpenAI agreeing to purchase billions worth of Amazon AI chips as part of the arrangement.
Jassy characterized semiconductors as a potential “new pillar for Amazon.”
Amazon’s current market valuation is approximately $2.38 trillion.
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