Why Amazon CEO Andy Jassy says the company is especially suited to win in AI

By Emily Bary

Amazon's 'building blocks' and cost-effective AI chips are among its strengths, CEO says in annual shareholder letter

It's no surprise that artificial intelligence got a prominent mention in Amazon Chief Executive Andy Jassy's lengthy annual shareholder letter that came out Thursday morning.

In it, Jassy called out the ways the company's Amazon Web Services cloud-computing business is helping to fuel the AI revolution, specifically around generative AI - the technology popularized by OpenAI's ChatGPT application.

We're optimistic that much of this world-changing AI will be built on top of AWS.Amazon CEO Andy Jassy

"While we're building a substantial number of GenAI applications ourselves, the vast majority will ultimately be built by other companies," Jassy wrote. "However, what we're building in AWS is not just a compelling app or foundation model."

Jassy said that AWS offers services at various levels of the technology stack that will "democratize this next seminal phase of AI, and will empower internal and external builders to transform virtually every customer experience that we know (and invent altogether new ones as well)."

In his view, customers will want to build transformative AI features on Amazon's (AMZN) cloud platform.

Part of that comes down to Amazon's longstanding focus on what it dubs "primitives," or "discrete, foundational building blocks that builders can weave together in whatever combination they desire," per the letter.

Jassy also discussed Amazon's efforts in AI chips - a hot theme, as semiconductor shares with AI exposure have surged over the past year.

AWS companies are looking to build foundation models (FMs), and so far "virtually all the leading FMs have been trained on Nvidia chips," according to Jassy.

See also: Is Amazon's stock a better bet than Nvidia's? This analyst makes the case.

"That said, supply has been scarce and cost remains an issue as customers scale their models and applications," he continued. "Customers have asked us to push the envelope on price-performance for AI chips."

Jassy noted that newly announced versions of Amazon's Trainium chips for AI training and Inferentia chips for AI inference "are both meaningfully more price-performant than their first versions and other alternatives."

Amazon's stock had a strong 2023, rising 81%, and it's up another 22% to start this year.

Jassy's pay, however, barely budged in 2023, according to Amazon's proxy filing that also came out on Thursday. Jassy brought home total compensation of $1.36 million last year, compared with $1.30 million the year before. Of his latest total, $365,000 represented his base salary and the rest was "other compensation," which the company said includes security arrangements.

Former CEO Jeff Bezos, now Amazon's executive chair, saw his compensation unchanged at $1.68 million.

Read: Amazon scores record valuation for the first time since 2021

-Emily Bary

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04-11-24 0732ET

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