Amazon's strategic, multi-billion dollar investment in artificial intelligence, particularly in its underlying compute infrastructure, is demonstrably paying dividends, propelling a significant re-acceleration in AWS revenue growth and fostering innovation across its vast retail empire. This was the central theme articulated by Ronald Josey, Citi's Senior Internet Analyst, in a recent interview on CNBC's 'The Exchange' with Contessa Brewer, where he offered sharp commentary on Amazon's latest earnings results and its formidable positioning in the burgeoning AI landscape.
Josey highlighted that the market's primary focus going into Amazon's recent earnings call was discerning whether Amazon Web Services (AWS) would demonstrate a renewed growth trajectory. This anticipation stemmed from a period where AWS, a foundational pillar of Amazon's profitability, had seen its growth rates moderate. The results provided a clear answer: "We finally got to see that re-acceleration, or at least the beginning phases of it, based off the investments that they've made over the past, call it, year and a half or so," Josey observed. This resurgence is directly attributable to Amazon's aggressive build-out of its AI capabilities, transforming its cloud infrastructure into a powerhouse for generative AI workloads.
A pivotal insight emerging from Amazon's strategy is its proactive approach to addressing the fundamental bottleneck of AI: power. The insatiable demand for compute resources by generative AI models places immense strain on existing infrastructure, making power a critical limiting factor. Amazon, however, has moved decisively to mitigate this. Josey underscored this by stating, "Will AWS re-accelerate? The answer was yes and most importantly, given the amount of power that they are adding with that 3.8 gigawatts coming on here in the last trailing 12 months... we should see continued growth going forward." This substantial investment in power capacity, with another gigawatt slated for the next quarter, positions AWS not merely as a cloud provider but as a strategic enabler for the most compute-intensive AI applications.
Amazon's strategic investment in power infrastructure is a critical enabler for its AI ambitions. This foresight addresses a looming bottleneck in the high-compute demands of generative AI.
This deliberate expansion of its power footprint is not just about meeting current demand; it's about securing future competitive advantage. "Power was a limiting factor... and what the big surprise I think from this quarter was Amazon helped to solve that power by adding that 3.8 gigawatts in the past year," Josey elaborated. This capability allows Amazon to offer a robust and scalable environment for businesses looking to develop and deploy their own AI solutions, effectively carving out a larger share of the emerging AI market. It also places Amazon on a more level playing field with rivals like Google, which has similarly been verticalizing its AI approach with proprietary chips like TPUs and models such as Gemini.
Beyond the core infrastructure of AWS, AI is also making a tangible impact on Amazon's consumer-facing retail operations. Josey noted that the retail business is performing well, with "everyday essentials" growing at over 20%. More significantly, Amazon is leveraging generative AI to fundamentally transform the shopping experience through what Josey termed an "agentic commerce approach" with innovations like the Rufus chatbot and the new Alexa Plus. These tools are designed to enhance customer engagement and streamline the purchasing journey, offering more personalized and intuitive interactions.
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The early returns from these AI-powered retail initiatives are impressive. Josey shared a compelling figure: "To hear Rufus already delivering, call it, $10 billion of incremental revenue growth, I think that tells you that we're on to something." This substantial incremental revenue underscores the immediate and significant commercial value of integrating generative AI directly into the retail platform. It demonstrates that AI is not merely an abstract technological advancement but a powerful engine for direct revenue generation and customer satisfaction, redefining how consumers discover and purchase products. This agentic commerce approach, while still evolving, is poised to reshape the competitive landscape of online retail, with Amazon at the forefront.
Overall, Citi's analysis paints a picture of Amazon successfully navigating the complex demands of the AI era. By strategically investing in compute power, addressing infrastructure bottlenecks, and deploying generative AI tools across both its enterprise cloud and consumer retail segments, Amazon is not only re-accelerating its growth but also solidifying its position as a dominant force in the evolving digital economy.
