Nvidia (NVDA) continues to thrive amid the AI boom, securing a deal with Amazon (AMZN) for 1 million GPUs by 2027, which promises substantial revenue for the chipmaker. However, Amazon’s increasing reliance on its own AI chips, particularly Trainium, poses a significant challenge. Amazon’s planned $200 billion investment in data centers this year, up from $131.8 billion last year, will see a growing share allocated to its custom chips, which are gaining traction among developers.

This shift is critical for Nvidia as Amazon’s CEO, Andy Jassy, revealed that AWS is prioritizing Trainium chips, with a backlog of $225 billion for these units alone. This trend reflects a broader industry movement, with competitors like Alphabet and Microsoft also investing heavily in custom chips to reduce costs and enhance differentiation.

For market professionals, the key takeaway is the potential erosion of Nvidia’s market dominance in AI accelerators, which could impact future earnings growth and introduce volatility for its stock, even at a relatively low forward earnings multiple of 25x.

Source: fool.com