Amazon considers selling its proprietary AI chips to third parties

Amazon Web Services (AWS) is in early discussions to sell its Trainium chips—the cloud provider’s proprietary AI chip—to third-party companies. According to AWS AI chief Peter DeSantis, the cloud giant is in talks to sell the hardware to other companies for use in data centers. The potential shift represents a direct challenge to Nvidia, which currently dominates the AI chip market. Historically, AWS has kept its silicon for its own cloud infrastructure, but selling the chips directly would mark a significant strategic pivot.

The scale of Amazon’s silicon ambitions was highlighted in early April in Amazon CEO Andy Jassy’s annual shareholder letter. Jassy wrote: “If our chips business was a standalone business, and sold chips produced this year to AWS and other third parties (as other leading chips companies do), our annual run rate would be ~$50 billion. There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future.” A run rate extrapolates current financial performance over a full year. While a ~$50 billion business would rival semiconductor companies like Intel, it remains a fraction of Nvidia’s current $326 billion revenue run rate. Nevertheless, Jassy indicated that demand is high enough that it is quite possible Amazon will sell racks of chips to third parties in the future.

AWS spokesperson Doron Aronson confirmed that the cloud provider may sell these chips. Aronson noted that while AWS has historically declined requests to sell its chips directly, Jassy’s comments reflect a potential shift toward selling racks of chips to third parties in the future. Historically, AWS has preferred to keep its chips integrated within its own cloud ecosystem, where it can charge customers for AI tokens and bundle additional services like storage, security, and networking.

To meet the demand required for direct chip sales, Amazon would need to secure manufacturing capacity through partners like TSMC, a semiconductor manufacturing facility (or foundry). However, TSMC’s capacity is constrained; Nvidia has recently supplanted Apple as the foundry’s largest customer, making it difficult for competitors to secure additional production slots. This competitive pressure comes as Nvidia itself expands its reach, targeting a $200 billion market for CPUs to compete with chipmakers like Intel and AMD.

Why it matters

Amazon is considering selling its proprietary Trainium AI chips to third parties, a move that would position the cloud giant as a more direct competitor to Nvidia’s dominant market position.