By Timothy Green
Publication Date: 2026-02-09 20:00:00
Custom AI chips are proliferating in cloud data centers.
Shares of Amazon (AMZN 0.56%) plunged on Friday after the company disclosed it would ramp up capital expenditures to $200 billion this year. Amazon is betting big on AI infrastructure: “…we are monetizing capacity as fast as we can install it,” said Amazon CEO Andrew Jassy in the fourth-quarter earnings call.
While the jury is still out on whether Amazon’s prolific AI spending will pay off in the long run, some of that spending will go toward a business that isn’t getting much attention from investors. Amazon has installed 1.4 million of its Tranium2 AI chips in its data centers, and the results have been spectacular. Revenue from Amazon’s custom chips, which include Tranium and Graviton CPUs, has reached an annual run rate of $10 billion and is growing by more than 100% annually.
Amazon is still a prolific buyer of Nvidia‘s (NVDA +2.46%) GPUs, but the success of Tranium puts a crack in Nvidia’s long-term growth story.
Image source: Getty Images.
Lowering costs for AWS customers
Nvidia dominates the AI accelerator market, and its chips are wildly expensive. Many AI infrastructure providers have little choice but to pay up for Nvidia’s chips.
For AI companies training advanced AI models, the high initial cost and high operating costs of Nvidia’s GPUs for AI infrastructure providers translate into higher training costs. Amazon claims that its Tranium chips offer 30% to 40% improved performance-per-dollar than…
