Amazon CEO Andy Jassy speaks with CNBC’s Jim Cramer about Mad Money in Seattle, WA. on December 6, 2023.
CNBC
Amazon CEO Andy Jassy tried to reassure investors who may be worried about the future payoff of the company’s massive investment in generative artificial intelligence.
In a conference call with analysts after the company’s third-quarter earnings report on Thursday, Jassy pointed to the success of Amazon’s cloud computing business, Amazon Web Services, which has become a significant profit engine despite the extreme costs associated with building data centers.
“I have proven over time that we can drive sufficient operating income and free cash flow to make this return very successful in investing business capital,” Jassy said. “We expect the same thing to happen with generative AI.”
Amazon spent $22.6 billion on property and equipment during the quarter, up 81% from a year earlier. Jassy said Amazon plans to spend $75 billion on capex in 2024 and expects a higher amount in 2025.
The jump in spending was mainly driven by generative AI investment, Jassy said. The company is quickly investing in data centers, network equipment and hardware to meet the demand for the technology, which has exploded in popularity since OpenAI released its ChatGPT assistant nearly two years ago.
“This is an amazing opportunity, maybe once in a lifetime,” Jassy said. “And I think our customers, our businesses and our shareholders will be happy about this long-term, aggressive approach.”
AI spending was a big topic on this week’s tech earnings call. Meta Wednesday raised guidance for capital expenditures, and CEO Mark Zuckerberg said he was “pretty happy” with the team’s execution. Meanwhile, MicrosoftInvestments in OpenAI weighed on fiscal first-quarter earnings released on Wednesday, and the company said capital spending would continue to rise. A day earlier, Alphabet CFO Anat Ashkenazi warned that the company expects capital spending to grow in 2025.
Amazon says its cloud unit has gotten more business from companies that need infrastructure to deploy generative AI models. It has also launched several AI products for enterprises, third-party sellers in the marketplace and advertisers in recent months. The company is expected to announce a version of the Alexa voice assistant that incorporates generative AI, which Jassy says is coming “in the near future.”
Amazon has not disclosed revenue from generative AI, but Jassy said on Thursday that it is a “multi-billion dollar revenue level” business on AWS that “continues to grow at triple-digit annual percentages.”
“It is much more than three times faster at this stage of evolution as AWS itself is huge, and we felt like AWS grew quite quickly,” he added.
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