Amazon’s (AMZN) business is quite complicated. The firm is more than just an online store. It makes money by selling its own products, taking fees from sellers who sell on its platform, providing advertising services, and offering cloud infrastructure. It's the last segment that is not only the most attractive part of the business but also a great growth driver. Amazon derives one-fifth of its revenue from Amazon Web Services (AWS), and that too at an outstanding 30% operating margin. With artificial intelligence as the main focus right now, this segment is gaining traction.
The race to build the strongest large language models (LLMs) has forced companies not just to invest heavily in new infrastructure but also to go to great lengths to gain an advantage over competitors. When it comes to AI, everything revolves around compute. Whoever has the cheapest compute can innovate faster, and that’s why having the best chips matters. For Amazon, this meant designing chips in-house for its AI workloads, and time is proving why that was a great move.
