Why Amazon and Nvidia Need Each Other
Amazon’s in-house chip program can’t fully match Nvidia’s AI dominance, while chip maker needs to keep its U.S. business strong
By Dan Gallagher
Heard on the Street
Wall Street Journal
Nov. 29, 2023 6:00 am ET
Nvidia CEO Jensen Huang, right, joined AWS CEO Adam Selipsky at the annual AWS re:Invent conference on Tuesday. PHOTO: AMAZON
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Amazon AMZN needed to put on a good AI show this week. It got a little help from a surprising friend.
The e-commerce titan also happens to run the world’s largest cloud-computing business. In fact, Amazon’s AWS unit now generates significantly more annual revenue than IBM and Oracle and comes second only to
Microsoft in the market for business-focused software and related services. But Amazon has also been perceived as lagging behind its largest cloud rival in the field of generative artificial intelligence, given Microsoft’s aggressive push into the technology since the public launch of ChatGPT almost exactly one year ago.
Hence, Amazon used its annual AWS re:Invent conference on Tuesday to lean hard into generative AI. It even announced its own chatbot called Q, which looks like a business-focused version of Microsoft’s Copilot. But most notable was the appearance of Nvidia NVDA Chief Executive Officer Jensen Huang, who joined AWS CEO Adam Selipsky on stage at the Las Vegas event to announce an “expanded collaboration” between the two companies. That will include AWS being the first cloud provider to launch services with Nvidia’s new H200 “superchips” that will start shipping next year.
Tech executives often cross-pollinate each other’s trade shows, and the occasions are generally not worthy of note. But this was the first time Huang has appeared at the annual confab for AWS, which has been a major customer of Nvidia’s data-center business over the last several years.
And it came amid rumors of growing friction between the two companies, as Amazon has gone further than its cloud rivals in designing its own in-house chips, while Nvidia has been pushing into offering cloud-computing services of its own. Amazon even used the same keynote on Tuesday to announce the fourth version of its Graviton processor and the second version of its Trainium accelerator—the latter of which competes with Nvidia’s chips in the training of AI models.
Amazon CEO Andy Jassy bragged on the company’s third-quarter call last month that its Trainium chips “have better price performance characteristics than the other options out there, but also the fact that you can get access to them”—the last part a dig at the well-known shortage of Nvidia’s very in-demand chips. That fed further the view that Amazon might have been on the outs with the supplier of a vital AI component. Nvidia mentioned Microsoft 10 times in its own earnings call last week compared with just one mention of Amazon.
Yet the truth is that the two companies very much need each other. Nvidia’s early moves in artificial intelligence have given the company a strong position that can’t be fully replicated even by in-house chips from established tech giants, who can custom design silicon for their own networks. That has been readily apparent in Nvidia’s recent financial results; the chip maker’s data-center sales have quadrupled over the past two quarters compared with the same period last year. Nvidia credited cloud-service providers as accounting for about half those sales.
But Nvidia also can’t afford to alienate the biggest buyer in the market. Amazon’s total annual capital expenditures have been more than twice that of Microsoft’s over the past four years, and market-research firm Dell’Oro Group estimates that the data-center portion of Amazon’s capex totaled $29 billion last year—39% above Microsoft’s estimated spend for the year. Nvidia is also facing the prospect that its sales to China could take a serious hit because of new export controls, making a strong relationship with a huge U.S. customer even more important. Friends at home count for a lot these days.
Write to Dan Gallagher at dan.gallagher@wsj.com
Why Amazon and Nvidia Need Each Other - WSJ (archive.ph) |
