Amazon's Custom Chip Business Crossed a $25 Billion Run Rate: Time to Load Up on Shares?

Key Points Amazon is taking a page from Alphabet's book and growing its custom AI chip offerings. Amazon has positioned itself to be a winner no matter how it fares in the AI arms race. 10 stocks we like better than Amazon › Amazon (NASDAQ: AMZN) isn't the company some people think it is. While some assume it's just an e-commerce giant, others are beginning to realize it's also a major player in the artificial intelligence (AI) computing space. Where it is making inroads here is by entering the semiconductor chipset market. To compete effectively in this segment of AI, companies are realizing they need to offer custom chips, and Amazon believes it has the potential to do so. Amazon's chip business just crossed a crucial threshold: A $25 billion annual run rate. This is a big deal, as it shows that Amazon's custom chips are catching on with clients. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » I think this is a bigger deal than the market gives Amazon credit for, and that lag in understanding makes the stock a great investment opportunity right now. Image source: The Motley Fool. Custom chips will drive massive future growth The cloud computing business started out relatively simply: A company builds computing power to run its operations, creates too much and decides to rent it out to clients to recoup its costs and perhaps generate a profit. Amazon is one of several companies to do this, and it has done it so well that it has turned it into a huge, profitable business segment. What computing units a company offers can make a big difference in attracting clients. The current industry standard for AI computing is GPUs from Nvidia . Amazon has a ton of Nvidia hardware in its data centers ready to rent. However, GPUs aren't purpose-built for a particular workload. Instead, they are general-purpose workhorses that perform well but could perform better if customized. Furthermore, they aren't cheap, and the cost of purchasing and renting them is quite high. To resolve this inefficiency, some companies are looking at using purpose-built computing units for their AI workloads. Alphabet was one of the first to bring these custom chips to market, and its tensor processing unit (TPU) chipsets are a great example of a custom chip that can deliver results comparable to a GPU at a lower price point. Amazon wants in on that business, so it started offering custom AI chips as well. This business is growing at a triple-digit rate, which is what's pushing up its annual run rate. Amazon management noted in its most recent shareholder letter that its Trainium2 AI chips offer about a 30% better price-performance than GPUs. It also noted that the product's popularity has helped it sell out capacity. Trainium3, which became available at the start of 2026, sold out a few months ago, and Trainium4 chips, which launch in 2027 or 2028, have also had a large chunk of capacity reserved. There's clearly huge demand for Amazon's custom AI chips, and that will make Amazon Web Services (AWS) a go-to place to build and train AI models. I think that makes Amazon a smart investment pick in this field, as it's clearly building a strong custom AI chip business that could grow in momentum as AI firms look to optimize their compute spending. Amazon and AWS will cash in regardless of what the trend is, making it a strong stock to consider buying now. Should you buy stock in Amazon right now? Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $429,223 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,318,055 !* Now, it’s worth noting Stock Advisor’s total average return is 965 % — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor , and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 22, 2026. Keithen Drury has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy .

Amazon is taking a page from Alphabet's book and growing its custom AI chip offerings.

Amazon has positioned itself to be a winner no matter how it fares in the AI arms race.

Amazon (NASDAQ: AMZN) isn't the company some people think it is. While some assume it's just an e-commerce giant, others are beginning to realize it's also a major player in the artificial intelligence (AI) computing space. Where it is making inroads here is by entering the semiconductor chipset market.

To compete effectively in this segment of AI, companies are realizing they need to offer custom chips, and Amazon believes it has the potential to do so. Amazon's chip business just crossed a crucial threshold: A $25 billion annual run rate. This is a big deal, as it shows that Amazon's custom chips are catching on with clients.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

I think this is a bigger deal than the market gives Amazon credit for, and that lag in understanding makes the stock a great investment opportunity right now.

The cloud computing business started out relatively simply: A company builds computing power to run its operations, creates too much and decides to rent it out to clients to recoup its costs and perhaps generate a profit. Amazon is one of several companies to do this, and it has done it so well that it has turned it into a huge, profitable business segment.