Amazon plans to invest 200 billion dollars in AI and chips

Amazon is surpassing even its high-spending tech rivals with its planned investments. The retail giant plans to invest around 200 billion dollars this year in AI, chips, robotics and satellites. The figure was difficult for investors to digest. The company's shares fell by more than ten percent in after-hours trading.

According to Amazon's chief executive officer Andy Jassy, the majority of the funds will be allocated to expanding the AI infrastructure. The company anticipates a profitable investment in the long term. Amazon has a strong presence in the computer cloud computing power and storage business, benefiting from the boom in AI. Revenue from the Amazon Web Services (AWS) cloud division grew by 24 percent year-over-year in the last quarter to 35.6 billion dollars, exceeding analysts' average expectations.

AI race of tech giants

Other tech companies are also investing heavily in expanding their AI capabilities. Google's parent company, Alphabet, announced capital investments of between 175 and 185 billion dollars for the current year just the day before. Facebook's parent company, Meta, plans to invest between 115 and 135 billion dollars. At the same time, it remains uncertain whether the massive investments in AI technology and its infrastructure can be recouped.

Amazon's spending spree is financed by both its cloud division and its successful retail business. In the last quarter, the company's revenue grew by 14 percent to 213.4 billion dollars. The bottom line was a profit of 21.2 billion dollars. This compares to 20 billion dollars in the previous year.

Profits were impacted by special costs of 1.1 billion dollars, partly for settling a tax dispute in Italy. The closure of grocery stores under the Amazon Fresh and Amazon Go brands in the US resulted in a charge of 610 million dollars.

AI and robots are changing Amazon

Amazon itself is also undergoing changes. The company is cutting around 30,000 office jobs in two waves, citing the transformation driven by AI. These job cuts resulted in a charge of 730 million US dollars for severance payments in the last quarter.

Jassy stated that while distribution centres will always employ “a lot” of people, robotics will take over monotonous tasks. This increases productivity and also makes the work safer for employees.

On the retail platform, Jassy is focusing on expanding the product range, including everyday items. “When you can order more and more from Amazon, you think of Amazon first,” he argued. This has recently been demonstrated in the US with the sale of fresh groceries.

This article was translated to English using an AI tool.

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