Amazon’s CEO, Andy Jassy, is reassuring investors about the company’s significant investments in generative artificial intelligence (AI), aiming to secure a strong future payoff. Following Amazon’s third-quarter earnings report, Jassy highlighted how the success of Amazon Web Services (AWS) showcases the long-term potential of high-capital investments, despite considerable costs.
Generative AI Driving Capital Expenditure Growth
During the third quarter, Amazon’s spending on property and equipment increased by 81%, reaching $22.6 billion. Jassy announced that Amazon plans to allocate $75 billion to capital expenditures (capex) in 2024, with projections for even higher investments in 2025. These unprecedented spending increases primarily stem from investments in generative AI. Amazon is rapidly enhancing its data centers, networking equipment, and AI hardware to meet rising demand for AI-powered services, an area that has gained substantial traction since the release of OpenAI’s ChatGPT nearly two years ago.
Jassy described the current wave of generative AI as a “once-in-a-lifetime type of opportunity,” reassuring that Amazon’s proactive investments will yield long-term benefits for customers, the company, and shareholders.
The AI Boom Influencing Big Tech Investments
AI investments dominated recent tech earnings reports. Meta, for example, raised its capital expenditure guidance as CEO Mark Zuckerberg praised the company’s progress in AI. Meanwhile, Microsoft and Alphabet also revealed plans for continued capital spending increases, each driven by their AI pursuits. Amazon’s cloud division, AWS, has capitalized on this demand surge by offering infrastructure to companies deploying generative AI models. The tech giant has also introduced AI solutions for enterprise clients, marketplace sellers, and advertisers, with expectations for a generative AI-enhanced Alexa to be announced soon.
Generative AI’s Revenue Potential in AWS
While Amazon hasn’t disclosed specific AI revenue figures, Jassy shared that AWS’s generative AI business has reached a “multi-billion-dollar revenue run rate” and continues to expand at triple-digit rates year-over-year. According to Jassy, the growth trajectory of Amazon’s AI services is already outpacing the early growth of AWS itself, a sign of the accelerating demand and profitability potential for generative AI in Amazon’s ecosystem.
Key Takeaways for Amazon’s Future in AI
Amazon’s substantial capex investments underscore its commitment to dominating the generative AI space. With a focus on expanding AWS capabilities and launching innovative AI-driven products, Amazon is well-positioned to capture a larger share of the AI market and deliver sustained returns for stakeholders in the long term.
