Amazon has recently announced that it is struggling to keep up with the surging demand for artificial intelligence (AI) services, echoing similar concerns raised by its rival, Microsoft Corp.
Despite ambitious plans to invest heavily in AI infrastructure, Amazon faces significant capacity constraints that are impacting its growth.
CEO Andy remains optimistic about the long-term potential of AI and expects the constraints to ease in the second half of 2025.
He emphasized that lower costs for AI components could actually stimulate greater demand, similar to the early days of the internet and cloud computing.
Amazon Inc.’s Investment Plans and Constraints
Amazon CEO Andy Jassy revealed during the company’s fourth-quarter earnings call that Amazon plans to invest over $100 billion in AI this year, with the majority of the funds allocated to data centers, homegrown chips, and other equipment to support its cloud division, Amazon Web Services (AWS).
However, Andy warned that growth would be “lumpy” due to delays in obtaining hardware and insufficient electricity supply.
Despite these challenges, Amazon’s AWS division reported a 19% increase in revenue to $28.8 billion for the quarter ended December 31, 2024.
Operating income for the division was $10.6 billion, exceeding analysts’ projections.
However, the company’s shares declined by about 4% in extended trading after the earnings call, as investors expressed concerns about the impact of capacity constraints on future growth.
Echoes of Microsoft’s Challenges
Andy’s comments mirror those of Microsoft CEO Satya Nadella, who last week admitted that his company’s cloud sales growth was hindered by a lack of data centers to handle the demand for AI products.
Both companies are experiencing similar issues with chip supply and power capacity, which are limiting their ability to bring new data centers online.
Analysts have noted that Amazon’s growth in AWS did not accelerate as anticipated, indicating that the company is facing the same types of capacity constraints as its rivals, Google and Microsoft.
Sky Canaves, an analyst at Emarketer, commented that Jassy’s warning on AWS growth constraints overshadowed a generally strong holiday quarter for Amazon.
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