Amazon Just Shared Great News for This AI Chipmaker (Hint: Not Nvidia)
Amazon plans to spend $200 billion on AI, with a significant portion directed towards its custom chip business, which is growing rapidly. CEO Andy Jassy highlighted the success of the Trainium chips, with strong demand expected to continue. Marvell Technology, a partner in this venture, faces challenges but remains a key player in the custom silicon market. Despite concerns about its position with Amazon and Microsoft, Marvell's stock is seen as a promising investment opportunity due to its broader portfolio and expected revenue growth in AI accelerators.
Amazon (AMZN +0.04%) surprised investors when it shared its artificial intelligence (AI) spending plans for 2026. The tech giant is budgeting $200 billion for capital expenditures this year, nearly a $70 billion increase from 2025.
A large portion of Amazon's new data center capacity coming online over the next couple of years will include Nvidia (NVDA 0.11%) GPUs. But a growing portion of Amazon's spending appears to be going toward another group of chipmakers, including one that investors can buy right now at a great price.
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The $10 billion chip business is growing at triple-digit rates
CEO Andy Jassy told Amazon investors that Amazon's custom chip business within Amazon Web Services is now at a run rate of over $10 billion. What's more, it's still growing at a triple-digit percentage rate year over year.
Amazon's custom chip business includes its Graviton CPU and custom AI accelerator chips for training and inference, Trainium and Inferentia. Jassy was particularly happy with the demand for its Trainium chips. He said the Trainium2 chip experienced its fastest-ever ramp-up in demand. The company announced Trainium3 in December, and Jassy said he expects the chip supply to be fully committed by mid-2026. It's also seeing strong interest in the upcoming Trainium4.
NASDAQ: AMZN
Key Data Points
It's worth noting Amazon isn't the only company seeing strong demand for its custom AI chips. Alphabet has reported increased demand for its Tensor Processing Units. Anthropic reportedly ordered over $20 billion worth of the chips for deployment in its own data centers. Microsoft (MSFT 0.09%) and Meta Platforms are also moving a larger percentage of workloads to their custom silicon solutions. Meta is using its own chips for AI inference and for training its core ranking and recommendation algorithms. Microsoft is using its Maia 200 chip for inference with Copilot, among various other applications.
While Nvidia remains a key supplier to all of the above companies, demand for custom silicon is clearly growing, and it may be growing the most at the largest cloud computing platform in the world, Amazon Web Services. That means Nvidia's biggest growth days may be behind it, while other chipmakers behind these custom silicon solutions could see considerable top-line and earnings growth still to come.
The AI chip stock benefiting from Amazon's chip business
Amazon partnered with Marvell Technology (MRVL +0.61%) to design its Trainium chips. The two solidified their partnership in late 2024, signing a five-year agreement for Marvell to supply chips from across its portfolio to AWS data centers.
Despite the strong demand for Amazon's Trainium chips, though, Marvell's stock has struggled to find traction with investors. That's due to various reports indicating Marvell's position with Amazon, as well as its other big custom silicon customer, Microsoft, may be diminishing.
Amazon is reportedly using AIChip for Trainium3 and Trainium4 chip designs. Marvell's earlier design accounts for only a small part of the chip's overall interface. As a result, licensing revenue from Amazon's new chip sales could fall relative to Trainium2.
NASDAQ: MRVL
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But investors may have forgotten about Marvell's five-year agreement with Amazon. Marvell makes more than custom AI accelerators. In fact, its networking chips are a bigger business right now. Amazon will likely continue using Marvell for interconnect and other data center needs, such as switching and storage, which can easily be adapted from one Trainium chip design to the next generation. Its recent acquisition of Celestial AI should support its position in AI-focused interconnect chips.
Marvell shares also took a hit from fears that it would lose its Microsoft design. But that doesn't seem to be the case for the time being. Management is forecasting a big step-up in fiscal 2028 custom AI accelerator revenue, in line with the expected ramp-up in Microsoft's Maia 300 chip it's designing.
CEO Matt Murphy addressed the concerns in December, noting nothing has changed in the company's outlook since Amazon announced Trainium3 and reports about AIChip and Microsoft surfaced.
As such, Marvell looks like one of the best opportunities to capitalize on the rising demand for custom silicon solutions in hyperscale data centers. With shares trading for just 22.6 times forward earnings estimates as of this writing, the stock looks like an excellent opportunity for investors.
