Amazon Joins $700B AI Spend Wave While AWS Chip Unit Eyes $50B
Amazon joined Big Tech in spending $130.6 billion on AI in Q1 and will help drive the sector past $700 billion by year-end. Its AWS custom chip unit, at a $20 billion run rate, may begin third-party sales to target $50 billion.
1. Big Tech AI Spending Surge
Amazon and other leading tech firms funneled $130.6 billion into AI projects in the first quarter of 2026, a sum exceeding the Manhattan Project’s cost. Amazon’s continued investment is part of a broader plan to push total AI spending past $700 billion by year-end, reflecting its commitment to advanced infrastructure and services.
2. AWS Custom Chip Business Outlook
AWS’s in-house Graviton and Trainium chips power Amazon’s cloud operations and generate a $20 billion annual revenue run rate. Amazon is evaluating an external sales strategy for these chips, aiming to expand the business to $50 billion once production capacity meets internal and third-party demand.
3. Cost Pressures and Profitability
Memory chip prices have surged by 50% this year, driving up component costs across AI hardware. Despite higher capex, Amazon’s latest earnings delivered double-digit revenue growth, suggesting AI-driven services and AWS expansions remain profitable for now.