Apr 11, 2024 - Business

Amazon CEO: "We're deeply investing" in generative AI

photo of a man in a suit with his pointer finger up in the air

Photo by Thos Robinson/Getty Images for The New York Times

Amazon CEO Andy Jassy revealed details about the company's investments in generative AI in his annual shareholder letter published Thursday morning.

Why it matters: It costs money to make money and before many companies can reap outsized rewards from selling new AI products and services, they are expected to outlay enormous sums to build them.

  • From the energy required to power data centers that run AI models, to the price of new chips to AI worker salaries that can reach $900,000, Wall Street is watching the way Big Tech companies create growth and manage costs.

What he's saying: "[T]here are three distinct layers in the GenAI stack, each of which is gigantic, and each of which we're deeply investing," Jassy writes.

  • The "bottom layer" of Amazon's AI strategy is to help developers and companies train models and produce predictions. Amazon says having its own custom AI training and inference chips will bring down costs for customers.
  • A "middle layer" serves companies that want to use their own data to customize existing foundational models and gain security and other features to build and scale generative AI applications.
  • The "top layer" is where Amazon builds generative AI applications for its own consumer businesses. For example, there's "Rufus," Amazon's AI-powered shopping assistant, and the Amazon Web Services "Amazon Q."

Zoom out: A year ago, Amazon was emerging from a state of transition as pandemic-era trends melted away into a new state of normal.

  • Not only had e-commerce sales slowed from peak stay-at-home periods, tech companies were pulling back on cloud spending amid economic jitters.

Now, Amazon aims to expand from cloud computing through AWS to becoming the world's largest AI playground, Axios' Ryan Heath reported in March.

  • Alongside Thursday's annual shareholder letter, Amazon also announced the addition of a new AI-focused board member Andrew Ng, who is the managing general partner of a venture studio that helps entrepreneurs launch AI companies.

The big picture: The twin engines of Amazon's business are its cloud computing unit, AWS, and its e-commerce platform.

  • And as AWS shifts into new, potentially higher cost gears, cost cutting within its logistics network will likely become even more important.
  • Moving products even closer to customers to save money, for example, is "in focus in 2024," he says.

Another notable takeaway: Jassy says Amazon Prime Video "can be a large and profitable business on its own."

  • Driving that optimism is the company's recent decision to put advertising into its video service.

The intrigue: Amazon's overall growth strategy is complex because the company is in so many different types of businesses, including satellite internet and healthcare.

  • Drawing from different parts of this year's letter, Jassy seems to want to position Amazon as "the world's biggest start-up" that builds and experiments with tech-enabled experiences that solve some kind of real-world customer problem.

What we're watching: Amazon's next quarterly earnings report is estimated to come out on April 25.

Related: Amazon pushes further into sales periods

This is a developing story. Check back for updates.

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