Amazon (AMZN) Eyes In-House Chips to Cut AI Costs — A Challenge to Nvidia (NVDA)?

Amazon AMZN -0.96% ▼ is taking another step into artificial intelligence infrastructure that could eventually affect Nvidia NVDA -2.08% ▼ . The company plans to use its internally developed Trainium and Inferentia processors to build and run its AI models instead of relying heavily on third-party chips, according to a Wall Street Journal report.

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Amazon’s AI chief Peter DeSantis said the strategy could significantly change the economics of the technology. If the company builds models on its own chips, it can do so at a fraction of the cost of providers that rely entirely on third-party hardware. He added that artificial intelligence remains too expensive today, and broader adoption will require lower computing costs.

Why Amazon Wants Its Own AI Chips

Most advanced AI systems currently run on processors supplied by Nvidia NVDA -2.08% ▼ , which dominates the AI accelerator market. Those chips offer strong performance but are expensive and in high demand. By shifting more workloads to its own silicon, Amazon aims to lower operating expenses for its cloud platform and price AI services more competitively through AWS.

The move does not replace Nvidia immediately, but it signals that large cloud providers want greater control over the hardware behind AI.

The effort comes as Amazon prepares for heavy investment. The company recently said it expects about $200 billion in capital spending in 2026. Chief Executive Andy Jassy indicated a significant portion will go toward data centers and custom chips tied to AI.

Is Amazon a Buy, Sell, or Hold?

Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 40 Buys and three Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMZN price target of $282.21 per share implies 35.73% upside potential.

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