Why the Markets Ignore Amazon: AWS, Robotics, and AI Chips (Trainium 3)

Ejaaz: The most contrarian AI bet of 2026 is the same company that you buy toilet paper from. Ejaaz: Many people will mistake Amazon as just an e-commerce company, Ejaaz: but they're secretly a frontier AI lab. Ejaaz: For example, did you know that they manufacture their own AI chips that are Ejaaz: as good as NVIDIA's GPUs, but 50% cheaper, which means that companies like Anthropic Ejaaz: and OpenAI, which have signed deals with Amazon, save tens of billions of dollars

Ejaaz: training their frontier models. But that's not all. Ejaaz: Amazon's compute platform, which accounts for 50% of their operating profits, AWS. Ejaaz: They're running the same playbook for AI now, serving AI cloud to any company Ejaaz: that wants to inference or train their own models. Ejaaz: And finally, Amazon has a secret up their sleeve which no one's talking about.

Ejaaz: Robots. For over a decade, Amazon robots have helped them scale manufacturing Ejaaz: and factory automation to the tune of tens of billions of dollars, Ejaaz: which make them the perfect company to design and build the robots of tomorrow.

Ejaaz: Amazon is easily a $5 trillion company hidden as a shopping platform. Josh: It's funny you mentioned the shopping platform part because when everyone, Josh: myself included, thinks of Amazon, they very clearly think of shopping platform. Josh: And for the right reason, I have some pretty unbelievable stats. Josh: So last year, Amazon shipped 6.3 billion packages, which is 17 and a quarter Josh: million per day, which is 200 per second that gets shipped.

Josh: So that equates to about 30% of all the US parcels were one company.

Josh: And that means one out of every three and a half packages was shipped by amazon Josh: so in terms of the amount of Josh: mass and atoms that they're moving throughout the universe throughout the world Josh: like as it relates to the other mag 7 companies they're moving the most amount Josh: of stuff just raw stuff and you have to imagine that once you start to apply Josh: ai to this in terms of efficiency gains and improvements like you're mentioning with robotics,

Josh: The amount of stuff can really be optimized quite a bit and have a meaningful impact on the business. Josh: But what we're seeing with the stock price that's on the screen here tells a Josh: very different story, which is basically flat in a year where every company Josh: in the world that was building an AI at Amazon's size went up an outrageous amount. Ejaaz: I think the story behind this is Amazon's just very misunderstood.

Ejaaz: Like, to your point, in the last year, it's gone up 1.4%, which is just insane. Ejaaz: It doesn't even beat inflation. doesn't beat inflation, which is just insane. Ejaaz: And listen, there are theories as to why this might be, but we're here to tell Ejaaz: you the story why Amazon is basically the biggest AI beach ball underwater that Ejaaz: is about to pop up in 2026.

Ejaaz: And some of my foundational thesis behind this, Josh, is that the stuff that Ejaaz: they focus on is really unsexy. Ejaaz: It's operational. And they're about to do the same for AI. Ejaaz: Like, think about it, like sorting, fulfilling packages, delivering it to people Ejaaz: isn't really a sexy thing. Ejaaz: And then if you talk about compute and serving compute to different companies,

Ejaaz: again, I don't really care about it. But Ejaaz: What most people don't realize is that the top software companies in the world run on AWS. Ejaaz: That's why when AWS servers went out a few weeks ago, the world couldn't function. Ejaaz: I couldn't use X. I couldn't scroll my favorite social media platforms, Ejaaz: Josh, because it ran on AWS. Ejaaz: So most people don't realize this. And they're about to do the same for AI.

Josh: Yeah. And one last thing I want to mention on this chart, since we have it on Josh: the screen, is that little PE ratio number, the price to earnings ratio, Josh: it's down to 35 now. And for reference, back in 2018, Amazon was trading at Josh: over a 200 times price to earnings ratio. Josh: So the multiples have really compressed a lot. But this is a much more mature Josh: company, which actually has a vector of growth, which is adding AI to the mix Josh: to increase this efficiency.

Josh: So EJS, you wrote all about this. It's in the newsletter that we published. Josh: But you actually created a proper article going through the bull case for Amazon.

Josh: And I think we're going to spend a good amount of time kind of going through Josh: the outline that you framed here for why you believe it to be, Josh: I mean, as the title says, the most asymmetric bet of 2026. Ejaaz: And for those of you who are wondering, hey, what is this article? Ejaaz: What is this newsletter? It's the Limitless Newsletter. Ejaaz: And if you were subscribed to it, you would have seen this article about a week and a half ago.

Ejaaz: So again, if you want the best alpha in AI, you have to subscribe to our newsletter. Ejaaz: But yes, Josh, one of the first things or one of my first arguments as to why Ejaaz: Amazon and there's an asymmetric bet here, is this thing called AI chips.

Ejaaz: You heard of them, Josh? You know, these little GPUs thing? Josh: You come across them? I might have heard of GPU, a little TPU, a whole bunch of U's. Ejaaz: All right, all right, okay. So you've heard of NVIDIA, it sounds like. Ejaaz: It sounds like you've heard of Google as well, as you know we're very bullish on Google here. Ejaaz: But what most people don't realize is Amazon created their own chips. Ejaaz: And it wasn't like they did this yesterday.

Ejaaz: They did this 10 years ago, Josh, when they acquired a company called Annapurna Labs in 2015, Ejaaz: which marks the start of their training and build of AI chips to help them with Ejaaz: machine learning inference, stuff like they was figuring out way back when, Ejaaz: when it came to recommend systems on their shopping platform. Ejaaz: Now, if you fast forward today, in the last few weeks, Josh,

Ejaaz: they released this chip called Tranium 3. It's part of their Tranium series Ejaaz: of chips, which are used to build and scale large LLMs or rather large AI models. Ejaaz: And Tranium 3, obviously, you know, the first question that pops into your head Ejaaz: is like, well, how does this compare to NVIDIA?

Ejaaz: Well, let me give you a few stats to kind of whet your appetite, Ejaaz: Josh, which is it is four and a half times more powerful than Tranium 2, Ejaaz: but it's also four times cheaper than Tranium 2. Ejaaz: So if you net both of those together, you get like a 10X kind of chip here, right? Ejaaz: But then it can also store five times more data than the previous chip that they had.

Ejaaz: So all of these combined together gives you about 80 to 90% of the same performance Ejaaz: as NVIDIA's latest GPU, Blackwell. Ejaaz: So I'm not just talking about NVIDIA's second, third, or fourth generation. Ejaaz: I'm talking about the latest generation that they have right now. So automatically, Ejaaz: Josh, if I was a Frontier AI lab that is spending hundreds of billions of dollars

Ejaaz: each year on NVIDIA's GPUs and you suddenly give me an option to spend 50% of that bill. So I save...

Ejaaz: 50 billion dollars why wouldn't i use this chip Josh: Yeah it sounds like a pretty good deal and i think we should Josh: probably start by outlining what exactly this chip is because there's a difference between Josh: nvidia's gpu google's tpu and then training which is something totally different Josh: and they fit if i'm not mistaken into two kind of basic categories so gpus which Josh: is nvidia's blackwell system that is a graphical processing unit it's kind of

Josh: a general purpose supercomputer you can use it for a lot of different things, Josh: graphic being one of them, Josh: but also the matrix math required to do AI training as another.

Josh: With TPUs like Google's making and these Amazon chips through Tranium, Josh: they're more focused on specific types of math. Josh: They are not general purpose. They're narrowly focused on AI training and AI Josh: inference. And that's where you get a lot of the efficiency improvements. Josh: So like we're seeing on the screen, 4.4 times higher improvement, Josh: four times more memory bandwidth, like the specs are insane, Josh: but they cannot be used for everything.

Josh: So it's a very specific type of customer that wants these types of chips. Ejaaz: Exactly. So if you were to kind of like compare the two NVIDIA GPUs and Amazon's training chips, Ejaaz: NVIDIA's GPUs can be used for a lot of broad use cases when it comes to training models. Ejaaz: Like there are several different types of ways to train an AI model.

Ejaaz: If you weren't sure which one to use, you would probably use an NVIDIA GPU because Ejaaz: it would just be consistent across all of those things. Ejaaz: But for Amazon's training chips, you need to specifically know exactly how you're Ejaaz: going to train a specific model and then it ends up being cheaper. Ejaaz: So it's for like a highly specialized type of AI lab that wants to train their own model.

Ejaaz: And what's interesting about this, Josh, is it's not just kind of the specific Ejaaz: architecture of how this chip is designed, it's also very much the cost. Ejaaz: I have a table pulled up here, and if you can take a direct look at it, Ejaaz: which compares Tranium 3 to Google's TPUs and NVIDIA's latest chip, Ejaaz: the Blackwell, and it is half the cost of NVIDIA's Blackwell. Ejaaz: That is excluding NVIDIA's margin that they add on top of this, Josh.

Ejaaz: So if you look at this, the average cost of an NVIDIA chip to manufacture is Ejaaz: around $6,500 to $7,000, but they end up selling it for $40,000. Ejaaz: That's the price that Amazon has to pay to buy these chips. That's the cost Ejaaz: that OpenAI has to pay to buy these chips.

Ejaaz: So I can think of two things here. If Amazon has an almost as good chip, Ejaaz: then it's going to largely kind of be a more attractive chip to buy for Frontier Ejaaz: AI Labs, but it's also going to cut into NVIDIA's margins drastically. Ejaaz: So you start seeing Amazon and Google TPUs being able to eat into the market Ejaaz: monopoly that NVIDIA has. Josh: Okay, so interesting. I want you to kind of help me understand this,

Josh: because a lot of this has been new information to me. I got intro to this through the article, and, Josh: What I understand is that Amazon's chips, not TPUs, are better on a per watt Josh: basis. They're more efficient. They're more cost effective. Josh: But I guess my question is, if Amazon were to start making these available to Josh: the public tomorrow, would they outsell Blackwell? Josh: Would people be more interested in these or would it just be a very specific audience?

Ejaaz: No. OK, so there's two things I want to bring up with you that kind of like Ejaaz: sway people's decisions when they're choosing between the chips. Ejaaz: Number one, an NVIDIA Blackwell chip on its own and also an Amazon training Ejaaz: chip on its own isn't useful, Josh. Ejaaz: You need to stack them into this thing called clusters. Ejaaz: Now, for an NVIDIA chip, you only have to put 72 of these chips together to Ejaaz: get the same performance per watt.

Ejaaz: But with an Amazon chip, you need to stack 144 of them together. Ejaaz: So it's a higher volume thing. Josh: Okay, so it's about double the amount of chips per little cluster that we have Josh: in a rack. and do those ships are they more expensive too or are they like cost Josh: better because it seems like that's a lot more complexity for like 80% of the efficiency. Ejaaz: They're cheaper. So on this table right now, they're half the cost.

Ejaaz: That's where the $3,000, the $3,500 come from. Ejaaz: So you may have more chips, which may take up more volume in your data center, Ejaaz: but they are cheaper to run at a cost kind of inference, right? Ejaaz: The other thing, Josh, is you might have noticed I said they're not as good Ejaaz: as NVIDIA GPUs. They're around 80% to 90% as good. Ejaaz: And the reason why there's that difference is because of NVIDIA's software moat.

Ejaaz: So this is something called CUDA or Compute Unified Device Architecture. Ejaaz: So basically, if you have the chips, that doesn't solve your entire problem. Ejaaz: You need software to be able to make these chips run really coherently together in their clusters. Ejaaz: NVIDIA has the stronghold of this, Josh. Any AI lab that is using NVIDIA GPUs, Ejaaz: which is the majority of AI labs, run the CUDA software system. Ejaaz: And typically, this has locked customers into using NVIDIA.

Ejaaz: So let's say they're interested in using Google's TPUs, they may not necessarily Ejaaz: still want to jump to use Google's TPUs because the software isn't the same. Ejaaz: They would have to rewrite their entire code base. Ejaaz: Amazon saw that and thought, hmm, I bet I could make this easier.

Ejaaz: And so they released this thing called a Neuron SDK, which now allows you to Ejaaz: copy and paste your code base from your NVIDIA instance into your Amazon GPU Ejaaz: or your Amazon Tranium chip in a few clicks.

Josh: Maybe this is a good time to point out the fact that Josh: this is a really big deal for amazon even if they don't sell Josh: these chips anywhere um because aws is such a huge story we were looking up Josh: before this episode was recorded how much of the internet is run by aws and Josh: it's about a third and another fascinating thing that you kind of pointed out Josh: in the intro but um as of last quarter i believe um aws

Josh: revenue was something like less than 20% of the total company, Josh: but it accounts for close to 70% of the actual profit share. Josh: I think it's like 66% as of the third quarter. Josh: So this small part of Amazon's business accounts for over half of the total Josh: profit every single quarter that comes in.

Josh: And with these plans to scale by using these new shifts, by using this gigantic Josh: data center that we're seeing on the screen that we're going to get into, Josh: there is a very clear trajectory for amplifying the one part of the business Josh: that actually matters the most for their top line. Josh: And we were talking earlier, it's kind of similar to what Costco does with their Josh: membership, where Costco's business operates on very thin profit margins.

Josh: They really don't make a lot, if any money, on the actual goods sold. Josh: A lot of that revenue comes from that membership, from the lock-in. Josh: And Amazon, what they have with AWS, is this unbelievably profitable engine Josh: that is becoming much more efficient using these new Tranium chips. Josh: But here on screen, and we have this really crazy looking data center. Josh: So maybe you could tell us more about what's going on here.

Ejaaz: Yeah, I mean, listen, we're not strangers to crazy data center setups. Ejaaz: We've spoken about Elon Musk's Colossus 2. We've spoken about Meta's super data Ejaaz: center that they're building. Ejaaz: Basically, all the top companies are spending tens of billions of dollars.

Ejaaz: And Amazon is no stranger to this either. They've invested $11 billion and they're Ejaaz: going to invest another $20 billion next year to build out their Indiana data Ejaaz: center campus to create around 2.2 gigawatts of compute. Ejaaz: That's equitable to about 1 million homes worth of energy by the end of next Ejaaz: year, which is just an insane goal to kind of like figure out.

Ejaaz: And to your point, Josh, like if they're able to pull off what they did with Ejaaz: AWS for AI compute specifically, Ejaaz: There is kind of like no reason for me to think at least why they wouldn't eat Ejaaz: into all the other NeoCloud's valuations. We've spoken about, what's his name?

Ejaaz: Leopold investing in this company called CoreWeave, which was one of the top NeoCloud providers. Ejaaz: And he invested to the tune of like, I think it was like 350 billion, Ejaaz: almost $400 billion into this company. Ejaaz: If Amazon just eats, like switches this on at the end of next year, Ejaaz: they like companies who are already running on AWS will just switch to the AI Ejaaz: version of AWS. it kind of doesn't make sense for them to kind of flip here.

Ejaaz: And it's why I think they have such a kind of sticky mode. They help with all the unsexy stuff, Josh. Ejaaz: I don't know if you saw this rollout of something called AI Factory. Ejaaz: Did you catch this by any chance?

Josh: No. AI Factory sounds interesting. We like factories. Okay. Ejaaz: So let me lay this out for you. A lot of enterprises and even governments want Ejaaz: to create their own versions of AI models, but they run into two main issues. Ejaaz: Number one, they don't know who to buy the chips from. Should they go to NVIDIA? Ejaaz: Should they go to Google? Should they go to Amazon? I have no idea. Ejaaz: And then two, they don't want to set it up themselves, right?

Ejaaz: But they also don't want to rent compute directly through AWS. Why? Ejaaz: Because, you know, they have some private information. They don't want to leak information. Ejaaz: They want Amazon to own the information. They want to hold it on their own private Ejaaz: service. So Amazon looked at this and said, Ejaaz: Okay, we're rolling out a service called AWS Factory, and here's what we offer.

Ejaaz: If you want NVIDIA GPUs, we got you. If you want Amazon Tranium GPUs or chips, Ejaaz: which are, by the way, 50% cheaper, we also got you. Ejaaz: If you want a hybrid or mix of both of these things, we've got you. Ejaaz: And what they do is they build the server racks, Josh, for them.

Ejaaz: They basically build out a data center for them, and this benefits them in so Ejaaz: many ways because they have the software and they have the hardware, Ejaaz: and they have 50% less the cost if they run AWS or Amazon Tranium chips. Ejaaz: So it's like an all-in-one package where they have lower latency, Ejaaz: they save on costs, and they have premium frontier intelligence. Pretty cool.

Josh: But there's an important distinction Josh: there where they're not building the factories for the company. Josh: They're building their own infrastructure that they're lending to the company, right? Josh: So if we're considering a company like Oracle, whose job is to build data centers Josh: for companies, you can think about the Project Stargate project with OpenAI, Josh: they are building actual infrastructure that OpenAI will own.

Josh: What Amazon is doing is they are building the infrastructure for you, Josh: but they're just leasing it to you. They still own the underlying core infra. Josh: So these other companies are essentially bankrolling the build-out of these Josh: factories, but doing so in a way that doesn't incur a lot of debt. Josh: Like they already have customers here. Josh: And the switching costs, I was looking because I was curious as it relates to Josh: these big cloud providers. Like AWS is 30%.

Josh: Azure and Google Cloud are another 33%. And then the rest is just kind of this Josh: mix of things. So a third of the companies are already, they trust the security Josh: of Amazon. They already use Amazon. Josh: They have their whole custom software stack built on Amazon. Josh: And in the world that they can just extend this to integrate AI into their offering, Josh: well, now 33% of the internet, they just get to direct AI offering built in. Josh: And that's like a pretty powerful thing.

Ejaaz: Yeah, Josh, you know which other little small company this reminds me of? Josh: Google. Who's that?

Ejaaz: Google already had their roots sewn into so many different products. Ejaaz: Basically, anyone who's ever graced the internet has come across a Google product, Ejaaz: whether it's Gmail, Android, Play Store, whether it's Google Search itself. Ejaaz: Amazon is the same bedrock for this, except it's just, hey, we've got the compute Ejaaz: that you're going to run your number one website or internet product on. Ejaaz: And they're converting the same users, as you said, into AI users.

Ejaaz: I just think it's a complete no-brainer. Ejaaz: And yeah, to kind of build on your analogy, they're not building the entire data center for you. Ejaaz: You're going to still have to buy the warehouse and supply it with energy and Ejaaz: electrical grid, but they've got everything else for you. Ejaaz: You don't have to have the upfront AI capex costs that, for example, Ejaaz: OpenAI has when they're committing $1.4 trillion over the next five years to buy these GPUs.

Josh: Okay, so we've covered the chips, we've covered the cloud, Now we have the physical Josh: infrastructure, the world of atoms. This gets to our 6.3 billion package statistic Josh: where Amazon, of all the Mag7 companies, they just move the most amount of stuff through the universe. Josh: And through that, they benefit, they stand to benefit a lot from automation, Josh: particularly as it relates to robots.

Josh: So here we have news that they have three quarters of a million robots already deployed. Josh: EJS, what are their plans going forward that are part of your bull case as it Josh: relates to kind of robotics and warehouses? Ejaaz: Okay, what I'm about to say is going to sound controversial. Ejaaz: Because I have said that Tesla is the number one robot company so many times, but I was wrong. Ejaaz: It's going to be- Oh, wow, that is a hot take. It's going to be Amazon.

Ejaaz: They already have almost a million of these things out there. And listen, listen. Ejaaz: Okay. They might not be the humanoid robots that grace your home, Ejaaz: that help you with the laundry. Ejaaz: I have laundry in my thing that needs to get sorted right now. Ejaaz: Wish I had one of those, right? Ejaaz: It's not going to be a robot car that takes me wherever I need to from A to Ejaaz: B with minimal accidental type stuff.

Ejaaz: But they're going to be the robots that scale very important things, Ejaaz: such as manual labor, Josh, which is like, you know, a multi-trillion dollar Ejaaz: industry or global sector as itself. Ejaaz: If you are able to cut down costs by 50 to maybe even additional percent, Ejaaz: why wouldn't you do that? Ejaaz: Amazon is the perfectly positioned company for that. They already have a million of these robots. Ejaaz: They are making very, very aggressive cuts on their labor force.

Ejaaz: I don't know if you saw, but like they cut 30,000 jobs about two months ago, Ejaaz: and they're aiming to scale that up to 600,000 warehouse workers by 2023, Ejaaz: which is honestly quite scary to hear for a lot of people, I'm sure, who are in these jobs. Ejaaz: But I think those job roles will essentially evolve. But it basically makes Ejaaz: Amazon the perfect company to design and build these automation robots of the future.

Ejaaz: Again, they're doing the unsexy stuff, the behind-the-scenes work. Ejaaz: They're not consumer-facing robots, but it's still a multi-billion-dollar industry.

Josh: We're going to have to agree to disagree on that Tesla robotic statement, I think. Josh: But I think there is an important difference to outline in the two different Josh: approaches the companies are taking. Josh: So Tesla very much treats the factory as the robot, and the robots that they're Josh: going for are more humanoid general purpose or as it relates to transportation. Josh: What Amazon is doing and what we're seeing here is...

Josh: Sure, there's some robots that look like humanoids, but a lot of the robots Josh: that are going to be in these factories, they're narrow-purpose robots. Josh: They're good for one task. It's a single arm that moves a specific way very quickly. Josh: And I think that's, when we talk about robots, it's important to understand Josh: that there are narrow-band robots and general-purpose robots like humanoids.

Josh: And what Amazon most likely stands to benefit from the most, Josh: at least in the shorter term, is these narrow-band robots like these arms that Josh: you're seeing on the screen that are really, really efficient at doing one specific Josh: task. or whether it be those things that are rolling on the floor that can move all these boxes around.

Josh: So as it relates to that type of robotics, Amazon is, they probably have the Josh: strongest case to be made on how much they can profit from putting those into Josh: their product because the factory very much is their product. Josh: How many packages they can ship per minute, if they can get that up from over, what was the number? Josh: Some crazy number, but whatever 200 per second packages, if they can get that Josh: up to 250, I mean, that's a huge increase in improvement.

Josh: So I think as it relates to factories, this automation is gonna be huge for them. Ejaaz: I have a question for you Josh. I noticed you said that it'll help them profit for their own products. Ejaaz: Do you ever see Amazon selling this type of robot to other factory manufacturers Ejaaz: in completely different sectors? Josh: I would hope not. But what I imagine Amazon does is uses this to create more Josh: of a platform for to entice sellers.

Josh: So a similar business, which I'm kind of thinking, like people use Shopify a Josh: lot to create web stores and to sell things. Josh: Shopify is good at creating the tooling. It's good at creating the actual website. Josh: It's good at pairing customers to consumers, taking care of all the infrastructure. Josh: But Amazon is the layer that sits beneath that and can actually handle the logistics for you.

Josh: So if you're shipping physical goods, I suspect that Amazon won't sell these Josh: robots to other companies. Josh: They will just, again, like they're doing with the data centers, Josh: they will build the infra and then offer the services to anybody who wants, Josh: because that's where they get the most amount of profit. Josh: So if you're a seller on Amazon who wants to know, well, what are the sales Josh: going to be like in November and December during the holiday season?

Josh: Can you project that for me? Josh: How much do I need to make? Okay, how much should I send to your warehouse so Josh: that you're able to get out all the orders on time? Josh: And as they get more of this intelligence, as they start to build more of an understanding. Josh: And this gets to the consumer side too, where they understand their customer. Josh: They know what the customer is shopping for. They know how to sell them ads.

Josh: You get this really fully vertically integrated experience as a seller on Amazon Josh: that you just can't get anywhere else. Josh: So if they're building these robots for their own warehouses, Josh: they should keep them and make everyone else use them because that total vertical Josh: integration where they understand the customer, they have all the automation, Josh: it creates the best experience for everybody.

Ejaaz: I see it. I just don't, Ejaaz: know if I can fully believe it just yet, because like in the same way that they Ejaaz: rent compute or like kind of CapEx, you know, data hardware to different people, Ejaaz: I feel like they would probably do the same for their robots as well. Ejaaz: But I saw Newsleek a few months or like last month, Josh, I don't know if you Ejaaz: saw this, that they're planning to take on the U.S. Postal Service.

Ejaaz: For those of you who don't know, Amazon pays the U.S. Ejaaz: Postal Service or rather facilitates $6.6 billion of revenue by using the U.S. Postal Service. Ejaaz: Amazon just didn't want to scale the delivery kind of service to the extent Ejaaz: of the U.S. Postal Service. Ejaaz: Now they're in the market of actually doing that. So we might end up with a Ejaaz: company that is just all consuming and using all the goods for themselves.

Ejaaz: I don't think they'll do it for chips, but maybe they'll end up doing it for robots. Ejaaz: And Josh, I guess the final point that I want to make and that we had in this Ejaaz: essay is Amazon is just really good at understanding what they're good at and Ejaaz: not treading outside of that line. So what do I mean by that? Ejaaz: Well, many people think that, okay, if you're a frontier AI company, Ejaaz: you should have a bleeding edge model.

Ejaaz: The funny part about this is Amazon has arguably the weakest AI model that's Ejaaz: out there, but it's good for their in-house use. Ejaaz: So they have a series of models, Josh, and it's called Nova.

Ejaaz: But have you ever used Nova, Josh? Have you ever kind of heard of it? Josh: No, I have not used. I actually haven't engaged with any Amazon AI yet. This is a new frontier. Ejaaz: Okay. Well, the reason for that might be because it is a speech-to-speech model, Ejaaz: meaning that you speak to it and it speaks back to you. Ejaaz: So you might be like, well, when the hell would I ever do that? Ejaaz: It's primarily in customer support. That's where they've used their AI model.

Ejaaz: So they trained a very small but hyper-efficient AI model to kind of facilitate Ejaaz: and backlog all of that kind of stuff. So they've been able to reduce their Ejaaz: kind of reliance on human customer support for that and save costs in that end. Ejaaz: The other side of things is Amazon is really good at focusing on enterprise customers.

Ejaaz: And so they produced an AI model software service, which basically allows any Ejaaz: enterprise to train their own AI model using Amazon's model architecture so Ejaaz: you can train it on its own proprietary data. Why would you want to do that as an enterprise? Ejaaz: Well, you have private data, you don't want to give it to OpenAI or you don't Ejaaz: want to give it to Google, but now you have a private instance where you can

Ejaaz: just run it on Amazon's model product. And that's really cool. Ejaaz: And that brings me to the final point, Josh, which is like kind of Amazon's Ejaaz: secret ability here, they've invested in some really big companies. Ejaaz: In fact, you might've heard of Anthropic. Ejaaz: Actually, I think you told me this on a previous episode. Josh: Yeah, a little known fact that most people don't know is that Amazon owns about Josh: 20%, give or take a few percentage points of Anthropic.

Josh: And it's funny because when I was considering the bear case, Josh: the reason to be skeptical of Amazon, one of the big things was comparing the Josh: other major cloud providers. We have Google Cloud Services, which is, Josh: I mean, a huge entity that runs on Gemini. Josh: It benefits from Gemini. Then we have Microsoft Azure, which is Microsoft's Josh: cloud service provider that partners with OpenAI and they receive 100% of the IP from OpenAI.

Josh: But then I was like, well, you know, Amazon actually does have their own big Josh: dog in their corner, which is Anthropic. Josh: They have this huge partnership with Anthropic where I'm sure a lot of resources Josh: are being shared, but Anthropic is also training using these new chips, Josh: which is fascinating because right now, Now, Anthropic has the most unbelievably Josh: great coding model in the world. Josh: So something is working behind the scenes.

Josh: And I guess time will tell us to see how it bleeds out into the rest of the Josh: industry. But they do have some big guns in their corner. Ejaaz: Kind of like going on the theme of the bear case, Josh, I have to like put the Ejaaz: realistic framing on this.

Ejaaz: Amazon's chips are awesome. They're almost as good as NVIDIA. They're 50% cheaper. Ejaaz: But there's one major constraint, which actually Google faces as well. Ejaaz: There's a little company in Taiwan called TSMC. Ejaaz: Some of you might have heard about it. But they require Taiwan Semiconductor Ejaaz: Manufacturing Company to be able to build the chips for them. Ejaaz: Google relies on them to build their TPUs as well.

Ejaaz: Can you take a guess at which company owns around 90% of the capacity for TSMC next year. Josh: Oh, I'm going to guess there's only one correct answer to this question, Josh: and that is NVIDIA, the owner of all chips and GPUs. Ejaaz: Yeah, so even if Amazon wanted to, let's say they created a hit product with Ejaaz: these chips and everyone wanted to use it, they couldn't even fulfill demand Ejaaz: because NVIDIA holds the stronghold.

Ejaaz: And so they have to wait until the end of 2027 where TSMC would have scaled Ejaaz: enough capacity at that point to be able to service that. Ejaaz: So they're going to start to look for alternative providers. Josh: Yeah, is that a real constraint? Because, okay, so I'm of two minds here where Josh: Amazon seems to be undervalued just on a relative basis. Their price to earnings ratio is very low.

Josh: Wall Street has basically priced them as break even throughout the course of Josh: the year, while a lot of the comparable companies have gone up like 80, 90, 100 percent. Josh: But then I hear things like this and I'm like, well, is this bull case that Josh: we're laying out actually even possible? Because we do have the TSMC kind of Josh: monopoly situation with NVIDIA. Josh: There are alternatives. I know Samsung is working on building another chip architecture.

Josh: Is that really the nail in the coffin? Like, is it possible for them to see Josh: this upside growth without TSMC? or is it really just relying on TSMC? Ejaaz: So a consistent trend for NVIDIA that owns the monopoly of capacity on TSMC Ejaaz: is they want to be able to train frontier AI intelligence. Ejaaz: Amazon's approach has been very clear. They want to be the cheaper alternative.

Ejaaz: Once you've scaled and built your frontier intelligence, we're the cheaper chip Ejaaz: for you to use to scale your product in general. Ejaaz: Inference is where they plan to make most of their money is my suspicion. Ejaaz: The other way I would address this is, I do think, it's not going to be immediate, Ejaaz: but eventually, over the next couple of years, companies like Samsung and other Ejaaz: competitors are eventually going to provide an alternative to TSMC.

Ejaaz: Now, critics will be jumping down my throat on that one because they're going Ejaaz: to say, well, for the last decade, nothing has changed. Ejaaz: And I will just respond to you that AI wasn't really a big thing over the last Ejaaz: decade. It's only over the last couple of years.

Ejaaz: And if big companies like Google, like Amazon are completely constrained because Ejaaz: of this one company and NVIDIA maintains the market monopoly there, Ejaaz: it's going to force companies like Samsung to create an alternative. Ejaaz: We're already seeing this. We had an episode this week or rather last week on Ejaaz: China copying the key components of a company called ASML to try and fill this gap.

Ejaaz: I just, if I was a betting man, which I am, and I own Amazon stock, Ejaaz: you know, just putting it out there, I think a competitor is going to come into the ring. Josh: Yeah, it seems like, well, the interesting thing is Samsung actually beat TSMC Josh: to the two nanometer chip architecture, which was a really big deal. Josh: And now they're going to partner with Apple and the largest companies are going Josh: to get their chips from somewhere else.

Josh: Is it going to be too long? EJS, 2027, we're going to have like AGI on Mars Josh: by then. So can they survive? Josh: Like, is that not too long? I don't know. So I guess maybe we could wrap this Josh: up by kind of where you currently stand. Josh: How long do you think these things will take to play out? Josh: How much upside do you think is really possible in the near term? Josh: How poorly has the market mispriced? Josh: Is this just like a bubble underwater that is waiting to pop out?

Josh: How does that all look kind of going forward into 2026 based on your understanding of it all? Ejaaz: Okay, so in short, I think it's bullish because even though they are reliant Ejaaz: on TSMC's capacity, they are still going to produce in the order of five to Ejaaz: six million Amazon chips next year. In fact, Google's going to do the same as well. Ejaaz: And one simple problem remains, Josh. Ejaaz: There's not enough GPUs, TPUs, or Tranium chips to satisfy demand right now.

Ejaaz: So even with NVIDIA's capacity, they're sold out. Ejaaz: So companies are looking for other types of chips to fulfill demand. Ejaaz: That's why OpenAI last week signed a $10 billion deal with Amazon. Ejaaz: That's why Anthropic signed a 1 million chip deal with Amazon. It's the same thing. Ejaaz: If Amazon creates all the chips, they're going to end up selling it. Ejaaz: Now, over the long term, are they going to win? Yes or no? it remains to be seen.

Ejaaz: You know, everyone thinks TSMC has a stronghold. I think there's eventually Ejaaz: going to be a competitor, which makes Amazon and Google way more competitive to NVIDIA's mode.

Josh: If you build it, they will come. And Amazon is building it. And they're building Josh: a lot of it. And they have won the least out of everybody. Josh: So just based on that math alone, there's got to be some hidden upside there. Like they're trading. Josh: There's such a cash generating business. Everybody who's watching this video Josh: has interacted with Amazon once in their life.

Josh: It's just it's a great company that will probably stand to benefit from ai when Josh: and at what scale we don't know but that is part of the fun we will follow it Josh: along as we go is just are there any parting thoughts before we we wrap up here.

Ejaaz: Actually yes i have one final bit of law we started off the episode critiquing Ejaaz: amazon stock pricing it's flat one of the main reasons that critics give is Ejaaz: because they don't really believe in the ceo andy jassy i don't think i agree Ejaaz: with that he's led the company to kind of like create quarterly earnings upon upon upon a time. Ejaaz: They're doing really well. They've grown a lot. But there's a small percentage chance, Josh.

Ejaaz: That Jeff Bezos reclaims the throne, similar to how Sergey Brin did so with Google. Why not? Ejaaz: He's outspokenly said that AI is the most important technological shift over the next decade. Ejaaz: He started a company that's focused on creating AI lab stuff for robotics and stuff. Ejaaz: It feels kind of weird for him to just leave his baby behind. Ejaaz: He knows he already has the vessel there. Why wouldn't he come back?

Josh: Okay, well, it's certainly the same thing as Google. Google had their founders Josh: disappear. Sergey Brin came back and the stock is up 80% in the 12 months that followed that. Josh: So there is something, there is a precedent for this happening. Josh: I mean, we have, Bezos is off, he's building rockets with Blue Origin, he's doing robotics. Josh: He seems very busy. If he comes back to Amazon, I'm sure that would be bullish to some extent.

Josh: What the extent is, we don't know, but we will be here to cover it as always Josh: as we go along this journey. Josh: That will wrap up our episode today on the Amazon Bullcase. If you enjoyed this Josh: episode, please do not forget to share it with a friend.

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Josh: recommend that concludes our first episode this week we still have two more Josh: to go so stay tuned for that there's a lot of interesting stuff happening and Josh: thank you so much for watching as always and we will see you guys on the next one see ya.