Amazon Web Services (AWS), a subsidiary of Amazon (AMZN, Financial), is reportedly close to securing a $475 million deal with IBM (IBM) to enhance IBM's artificial intelligence (AI) applications through cloud services using Nvidia (NVDA) processors. This agreement highlights AWS's strategic focus on AI and bolsters its demand for Nvidia GPUs.
The five-year contract is set to enable IBM to employ AWS's EC2 servers, equipped with Nvidia's GPUs, significantly boosting IBM's AI model training capabilities. IBM Research is already utilizing AWS's SageMaker machine learning platform for training some AI models on EC2 servers.
Although discussions continue and the final agreement is not yet signed, this potential collaboration will likely expand AWS and IBM's AI partnership. In May, IBM announced plans to integrate AWS into its Watson AI platform and combine Amazon SageMaker with its WatsonX AI and analytics platform.
AWS is also making strides in AI chip development, having created its own AI chips, Trainium and Inferentia, which it markets to cloud clients. Whether these chips will be part of the IBM collaboration remains unclear, but the AI cloud deal is expected to further accelerate AWS's growth.
AWS's AI business is anticipated to generate billions in revenue this year, growing annually by triple-digit percentages, outpacing AWS's overall growth. In the third quarter of 2024, AWS's revenue reached $27.45 billion, marking a 19% year-over-year increase. Amazon's capital expenditures for this year are projected to exceed $75 billion, with more investment expected next year, focusing on GPUs, networking, and data center infrastructure.
Additionally, Amazon is innovating in the food sector by integrating its Whole Foods and Amazon Fresh stores into a unified delivery system to strengthen its presence in the $1.5 trillion U.S. food industry. The company is also developing "Amelia" smart glasses to increase delivery efficiency and using autonomous robots and AI products to improve warehouse operations and delivery speed.
Overall, the potential AWS and IBM collaboration not only enhances their AI capabilities but also propels AWS's growth and demonstrates Amazon's innovation across multiple sectors.
