There are many opportunities for investors in artificial intelligence (AI). Breakthroughs in accelerated computing and high-performance semiconductor chips are impacting myriad products and services.
In the background, one of the most lucrative opportunities benefiting from the growing demand for AI is data centers. While Nvidia is the 800 pound gorilla in data center services, smart investors understand that there is many companies compete alongside the chip giant.
One thing that might surprise, however, is that not all data center investment prospects are for traditional infrastructure and storage. In fact, one of theMagnificent Seven“Peers participate in the action.
Although Amazon (NASDAQ:AMZN) is best known for its e-commerce marketplace and cloud computing platform, the company recently announced plans for an $11 billion investment to build data centers in Indiana.
Let’s take a look at why Amazon wants to build its own data center infrastructure and how these investments could lead to solid long-term gains in the future.
It all started with Amazon’s $4 billion partnership
Last September, Amazon announced it was investing $4 billion in an AI startup called Anthropic. At the time of the announcement, Amazon had invested $1.25 billion in Anthropic, with the additional $2.75 billion arriving at the end of March.
The main investment thesis revolves around Amazon Web Services (AWS), the company’s cloud computing platform. The past two years have been challenging for the macroeconomy, as unusually high inflation and rising borrowing costs have had a significant impact on both consumers and businesses. Enterprise software vendors were not immune to these setbacks and experienced a slowdown in sales growth.
A key aspect of the deal was Anthropic agreeing to train future generative AI models on AWS. Additionally, Anthropic’s models are also trained on Amazon’s in-house semiconductor chips, Inferentia and Trainium.
While these details may have seemed subtle at the time, Amazon’s latest move proves that the company doesn’t mess around when it comes to building an AI giant – and Anthropic represents an important pillar of that roadmap.
Now Amazon is doubling down
AWS is now a $100 billion company. It’s clear that as AWS has become a more important part of Amazon’s growth strategy, the company has invested significantly in cloud infrastructure, as evidenced by increased capital spending over of the last 10 years.
These investments don’t seem to be slowing down either. Amazon recently announced it was planning an $11 billion investment for data centers in Indiana.
I see the data center ambitions as a mechanism to complement the Anthropic investment. Amazon is developing its own custom chips in an effort to move away from an over-reliance on…
