Amazon CEO Andy Jassy’s annual shareholder letter offers a strategic commentary on the competitive landscape, akin to a subtle corporate challenge rather than an overt confrontation. This is intertwined with personal reflections, such as his childhood ambition of becoming a sportscaster and cherished memories of watching hockey games with his father.
To fully appreciate the competitive nuances within the letter, one benefits from an understanding of the industry's historical context. Jassy, however, opts for a sophisticated approach, avoiding direct challenges to competitors.
For instance, in addressing Nvidia, he emphasizes a "strong partnership" and assures that Amazon "will always have customers who choose to run NVIDIA" and will continue to support these chips within its cloud infrastructure.
Yet, Jassy also signals a significant shift, stating, "Virtually all AI thus far has been done on NVIDIA chips, but a new shift has started." He highlights that AWS customers are increasingly seeking "better price-performance," a demand Amazon aims to meet with its proprietary Trainium AI chips.
The CEO reports an overwhelming demand for these chips, with capacity for the latest model, Trainium3, nearly sold out. Remarkably, he adds that Trainium4, which is still 18 months from availability, is also experiencing similar pre-sale demand, with its capacity almost fully reserved.
This robust demand translates to an impressive $20 billion annual revenue run rate for Trainium. Jassy postulates that if Amazon were an independent chipmaker selling its products externally, this figure could soar to $50 billion in annual recurring revenue.
While acknowledging Nvidia's substantial $215.9 billion in actual revenue last year, Jassy positions Trainium as a formidable and rapidly ascending player in the market.
Intel was also a focal point in Jassy's letter. He underscored the widespread adoption of AWS's homegrown Graviton CPU, a direct competitor to Intel's x86 architecture, noting it "is now used expansively by 98% of the top 1,000 EC2 customers," representing some of the world's largest corporations. He further revealed that two companies had even requested to "buy all of our Graviton instance capacity in 2026." While Amazon couldn't fulfill these requests due to commitments to other customers, Jassy emphasized, "it gives you an idea of the demand."
Jassy also provided an update on Amazon Leo, the company's satellite internet competitor to Starlink, scheduled for a mid-2026 launch. He confirmed its early success, citing secured contracts with major clients including Delta Airlines, AT&T, Vodafone, Australia’s National Broadband Network, and NASA.
In an intriguing revelation, Jassy suggested that Amazon might eventually venture into selling robotics. He proposed leveraging data from its 1 million warehouse robots to develop "robotics solutions" for both industrial and consumer applications, hinting at the potential for Amazon humanoids in the future. Beyond robotics, he also highlighted progress in other Amazon businesses, such as same-day delivery, groceries, and drone operations.
A significant portion of Jassy's letter was dedicated to justifying the hundreds of billions of dollars Amazon has committed to capital expenditures. In February, he announced plans to invest $200 billion in capex for 2026, primarily for expanding AWS data centers. This investment surpasses that of other leading tech companies, all of whom are also increasing their capital spending. Jassy's detailed rationale to shareholders is particularly pertinent given Amazon's stock performance, which had previously dipped below $200 per share and had not yet fully rebounded.
"We’re not investing approximately $200 billion in capex in 2026 on a hunch," Jassy asserted. He cited Amazon's deal with OpenAI as an example, where the model maker pledged to spend $100 billion on AWS. However, some observers remain skeptical about OpenAI's ability to meet all its spending commitments.
Addressing this skepticism, Jassy affirmed that beyond OpenAI, "there are several other customer agreements completed (and unannounced), or deep in process," all lined up to purchase AWS capacity.
The ultimate outcome of these investments remains to be seen. Jassy acknowledged the public debate, stating, "I’ve followed the public debate on whether this technology is over-hyped, whether we’re in ‘a bubble.’" Nevertheless, he firmly declared in his letter that, for Amazon at least, this is not the case.
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