Amazon CEO Andy Jassy defends the company’s AI investments
In Amazon CEO Andy Jassy’s letter to shareholders out today, he mentions “AI” more than 25 times. Amid tariff uncertainty that Wedbush analyst Dan Ives today said could hamper 10% to 15% of AI projects, Jassy doubled down on the company’s commitment to AI — while also being sure to emphasize they’re being smart about costs (and that AI won’t always cost so much).
“We continue to believe AI is a once-in-a-lifetime reinvention of everything we know, the demand is unlike anything we’ve seen before, and our customers, shareholders, and business will be well-served by our investing aggressively now,” he wrote. “Fundamentally, if your mission is to make customers’ lives better and easier every day, and you believe every customer experience will be reinvented by AI, you’re going to invest deeply and broadly in AI.”
Jassy emphasized that while the capital outlays needed are extensive, they will pay off over time: “We spend this capital upfront, even though these assets are useful for many years (in the case of datacenters, for at least 15-20 years). We only start monetizing this capital investment many months after we spend the capital, and over many years — which leads to attractive long-term FCF and ROIC (as people have seen in AWS over the last several years).”
He added that both the price of chips and inference will go down over time, but also seemed to nod toward Jevons Paradox, saying that lower prices will lead to more demand, but also more spending:
“We feel strong urgency to make inference less expensive for customers. More price-performant chips will help. But, inference will also get meaningfully more efficient in the next couple of years with improvements in model distillation, prompt caching, computing infrastructure, and model architectures. Reducing the cost per unit in AI will unleash AI being used as expansively as customers desire, and also lead to more overall AI spending. It’s like what happened with AWS. Revolutionizing the cost of compute and storage happily led to lower cost per unit, and more invention, better customer experiences, and more absolute infrastructure spend.”
“We continue to believe AI is a once-in-a-lifetime reinvention of everything we know, the demand is unlike anything we’ve seen before, and our customers, shareholders, and business will be well-served by our investing aggressively now,” he wrote. “Fundamentally, if your mission is to make customers’ lives better and easier every day, and you believe every customer experience will be reinvented by AI, you’re going to invest deeply and broadly in AI.”
Jassy emphasized that while the capital outlays needed are extensive, they will pay off over time: “We spend this capital upfront, even though these assets are useful for many years (in the case of datacenters, for at least 15-20 years). We only start monetizing this capital investment many months after we spend the capital, and over many years — which leads to attractive long-term FCF and ROIC (as people have seen in AWS over the last several years).”
He added that both the price of chips and inference will go down over time, but also seemed to nod toward Jevons Paradox, saying that lower prices will lead to more demand, but also more spending:
“We feel strong urgency to make inference less expensive for customers. More price-performant chips will help. But, inference will also get meaningfully more efficient in the next couple of years with improvements in model distillation, prompt caching, computing infrastructure, and model architectures. Reducing the cost per unit in AI will unleash AI being used as expansively as customers desire, and also lead to more overall AI spending. It’s like what happened with AWS. Revolutionizing the cost of compute and storage happily led to lower cost per unit, and more invention, better customer experiences, and more absolute infrastructure spend.”
