Andy Jassy is so bullish on Amazon's chips that he took a rare shot at Nvidia

• Andy Jassy shared his annual letter to Amazon shareholders — and AI was a big topic.
• The Amazon CEO said its chip business is "on fire."
• He also took a rare shot at Nvidia.

Andy Jassy used his annual letter to shareholders to tout Amazon's AI chip progress — and lay down the gauntlet to Nvidia.

Amazon is an Nvidia customer, but the e-commerce giant also makes its own AI chips, called Tranium.

Jassy said Amazon's chip business is "on fire" and that this demand is part of a shift in which companies are diversifying where they buy their AI chips from.

"Virtually all AI thus far has been done on NVIDIA chips, but a new shift has started," Jassy wrote. "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."

However, Jassy said that customers "want better price-performance."

He compared the shift to Amazon eating into Intel's dominance in the CPU space with its own chip that it launched in 2018, called Graviton.

"The same story arc is unfolding in AI," he said. Amazon's latest chip, Tranium3, is "30-40% more price-performant" than its previous model, Jassy said.

Last year, Business Insider reported that some startups found that Tranium 1 and 2 had been "underperforming" compared to Nvidia chips.

Jassy added that a "significant chunk" of Tranium 4 has already been reserved ahead of its widespread availability in 18 months.

Jassy said the annual revenue run rate for Amazon's chip business is now over $20 billion, and growing. Amazon uses its AI chips in its own data centers, which Jassy said could help the company reduce its $200 billion capital expenditure bill.

"At scale, we expect Trainium will save us tens of billions of capex dollars per year, and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference," Jassy wrote.

Amazon also sells access to Tranium chips to other companies via the cloud, including Anthropic and Uber. It could go one step further: Jassy said it's "quite possible we'll sell racks of them to third parties in the future."

Amazon's stock is down 1.2% this year and up more than 25% in the past year.

Nvidia did not immediately respond to a request for comment from Business Insider.