Amazon (AMZN) is poised to capitalize on a significant opportunity in the semiconductor market, leveraging its expertise in artificial intelligence (AI) and cloud computing. The company reported impressive growth, with sales reaching $716 billion and net income at $77 billion, driven by its e-commerce and Amazon Web Services (AWS) divisions. Notably, AWS is already the largest cloud service provider globally and is well-positioned to attract AI business from non-AI cloud customers, particularly through its in-house designed chips like Trainium and Graviton.

The potential for Amazon’s chip business could redefine its revenue streams, with annual revenue run rates for its in-house chips already at $20 billion, and projections suggesting it could reach $50 billion if sold externally. This shift not only promises substantial revenue growth but also significant cost savings, potentially saving the company “tens of billions” in capital expenditures annually.

For investors, this emerging chip business represents a compelling long-term growth avenue. With Amazon currently trading at 33x forward earnings estimates, now may be an opportune time to consider acquiring shares or holding existing positions as the company navigates this transformative phase.

Source: fool.com