Amazon.com Inc. (NASDAQ: AMZN) has decided to halt the development of its Inferentia AI chip, shifting its focus to the Trainium chip.
What Happened: This decision is part of Amazon's broader strategy to enhance cost performance in AI model training, reported Nikkei on Thursday.
Since it entered the AI chip market in 2018, Amazon Web Services has been offering both Inferentia and Trainium chips to AI companies.
However, Rahul Kulkarni, AWS's director of compute, announced that the product lines will merge, with a focus on Trainium for both inference and training tasks.
Trainium is designed with a larger memory capacity and supports diverse data formats, enabling rapid computations across multiple servers.
"We can get to the same level of optimization and cost performance benefits by doubling down on Trainium as a single, unified product," Kulkarni stated.
Why It Matters: During a tech event in Las Vegas, Amazon unveiled the Trainium2 chip and announced plans for the Trainium3 chip, expected in 2025.
The Trainium3 will use a 3-nanometer chipmaking process, doubling Trainium2's computing performance.
With this, Amazon aims to challenge Nvidia Corporation (NASDAQ: NVDA), which holds a 90% share in the AI chip market.
Apple Inc. (NASDAQ: AAPL) and AI startup Anthropic are among those adopting Trainium2 for AI development.
In October, Amazon reported third-quarter net sales of $158.9 billion, marking an 11% increase compared to the previous year. This performance surpassed the Street's consensus forecast of $157.2 billion, as per data from Benzinga Pro.
Price Action: Amazon's stock rose by 1.1% on Thursday, finishing at $220.55. In the after-hours session, it saw a dip of 0.1%, reaching $220.32. So far this year, Amazon shares have surged by 47.1%, significantly outperforming the Nasdaq 100 index, which gained 29.5% over the same period.
Amazon has a consensus price target of $238.16 from 38 analysts, with JMP Securities setting the highest target at $285 on Nov. 1. Latest ratings from Needham, BMO Capital, and MoffettNathanson indicate an average target of $244.67, implying an upside potential of 11.05%.