Adam Levy, The Motley Fool
5 min read
In This Article:
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Amazon is one of Nvidia's biggest customers.
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The cloud computing giant recently made a new AI investment in one of Nvidia's biggest competitors.
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The market is primed for the smaller company to take up more real estate in data centers.
Nvidia (NASDAQ: NVDA) has seen its sales soar on the back of a few big customers spending heavily to outfit data centers with as many of the chipmaker's GPUs as they can buy. Its top three customers accounted for 34% of sales last year.
Amazon (NASDAQ: AMZN) is likely one of those big customers. The cloud computing giant spent over $93 billion in capital expenditures over the last 122 months, primarily focused on building out data centers for artificial intelligence (AI). That number will climb above $100 billion this year. While there's a lot of overhead, including buildings, server racks, networking equipment, and more, a good chunk of that spending goes to Nvidia for its leading-edge GPUs.
But Nvidia's chips aren't the only ones Amazon uses in its servers, and the company just sent a signal that a competitor could be taking up more space in its data centers this year.
Amazon was caught flat-footed as generative AI took off in late 2022, but it's invested heavily to catch up with its competitors ever since. It made a $4 billion investment in Anthropic early last year, and it added another $4 billion in November. The most recent deal included a strategic partnership where Anthropic will use Amazon's custom silicon for large language model training and inference.
Amazon's custom AI chips are designed in partnership with Marvell Technologies. Marvell also makes networking chips and other data center chips among a broader silicon portfolio. Amazon made a small equity investment in the company in late 2021 well before it chose the chipmaker for its custom Trainium and Inferentia chips.
Amazon recently made another AI investment. Its first-quarter 13F filing with the SEC revealed a purchase of 822,234 shares of Advanced Micro Devices (NASDAQ: AMD). Those shares are worth about $90 million at today's price, which isn't a huge investment for a company generating tens of billions of dollars in free cash flow every quarter. However, that's still enough to make it Amazon's third-largest marketable equity holding in its portfolio.
AMD is Nvidia's closest competitor when it comes to advanced GPUs. It's also the only company Intel has licensed to use its x86 CPU architecture, which is essential for Windows PCs and servers. The chipmaker is well positioned to gain market share on both fronts (GPUs and CPUs), and Amazon's equity investment could signal an acceleration in AMD's sales to the largest cloud computing company in the world.
