Amazon's internal silicon operation has reached a $20 billion annual revenue pace while delivering chips that outperform industry leader Nvidia on price-performance metrics, according to CEO Andy Jassy's latest shareholder letter. The disclosure comes as the company prepares to spend roughly $200 billion this year on artificial intelligence infrastructure, a nearly 60% increase from 2025 levels that Jassy defended as necessary for market leadership.
"We're not investing approximately $200 billion in capex in 2026 on a hunch," Jassy wrote in the letter released Thursday morning.
The capital expenditure plan represents more than any of Amazon's technology peers will spend this year, with most funds directed toward data centers, custom processors, and networking equipment supporting AI workloads.
Amazon's Trainium2 AI accelerator delivered about 30% better price-performance than comparable graphics processing units and has largely sold out. The third-generation Trainium3 began shipping earlier this year with another 30-40% improvement over its predecessor and has already reached near-full subscription levels across customer deployments.
For the first time, Amazon revealed that artificial intelligence services within its AWS cloud division have achieved a $15 billion annual run rate as of Q1 2026. This figure provides context for the company's aggressive infrastructure investments, which Jassy compared to early AWS expansion when cloud computing represented just $58 million in annual revenue three years after commercial launch.
Two large customers attempted to purchase Amazon's entire available Graviton processor capacity for 2026 according to the shareholder letter, demonstrating intense demand for custom silicon alternatives to traditional x86 architectures. While Amazon declined these requests, Graviton now powers workloads for 98% of the top 1,000 EC2 customers while offering up to 40% better price-performance than competing x86 processors.
Jassy positioned Amazon's chip development strategy as reminiscent of previous industry transitions where proprietary solutions eventually overtook established market leaders.
"We have a strong partnership with Nvidia, will always have customers who choose to run Nvidia, and we will continue to make AWS the best place to run Nvidia," he wrote while simultaneously highlighting superior economics from Amazon's internally developed alternatives.
The company disclosed that its custom silicon business has doubled from a $10 billion annual run rate reported alongside Q4 2025 earnings to reach over $20 billion currently. This segment includes Graviton general-purpose processors, Trainium AI accelerators, and Nitro networking cards, all growing at triple-digit percentages year over year according to internal metrics.
Amazon shares gained 5.6% on Thursday following the letter's publication but remain only modestly positive for 2026 as investors evaluate whether massive capital expenditures will generate sufficient returns against competitive pressures from Microsoft Azure and Google Cloud Platform.
