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Thursday, Jul 25, 2024

Amazon is spending less on warehouses — and more on AI and its cloud business

Amazon is spending less on warehouses — and more on AI and its cloud business

Amazon is competing hard in the AI arms race. It says it's got the resources to help customers deploy the technology and is investing in even more.
Amazon is doubling down on investing in artificial intelligence as it spends less on warehouses and other parts of its logistics infrastructure that grew sharply in the wake of the pandemic.

"On our core fulfillment and in transportation areas, we actually are spending less year-over-year, and those estimates are going down," said Brian Olsavsky, Amazon's chief financial officer, in a call with analysts on Thursday. "And we are adding more dollars for large language models and generative AI."

"So we're creating some space in our fulfillment and transportation number that's being repurposed over to AWS," he said, referring to Amazon Web Services, which provides AI and machine learning services to unicorn customers including Stability AI and Hugging Face.

The company spent some $58.3 billion in capital expenditures last year, according to Amazon's 2022 annual report, which noted that the amount showed the company's emphasis on developing its "technology infrastructure."

Amazon CEO Andy Jassy echoed the company's commitment to AI, saying the e-commerce giant would be among the few companies to prioritize developing large language models, the technology behind generative AI tools like chatbots.

"If you look at the really significant leading large language models, they take many years to build, and many billions of dollars to build," he told analysts Thursday. "And there will be a small number of companies that want to invest that time and money, and we'll be one of them at Amazon."

Jassy added that he believed that generative AI tools that assist coders would be some of the most "compelling," and that Amazon also aspired to develop the "world's best personal assistant."

Referencing Amazon's voice assistant device Alexa, he said, "we've had a large language model underneath it, but we're building one that's much larger and much more generalized and capable."

"I think that's going to really rapidly accelerate our vision of becoming the world's best personal assistant," he added.

Amazon's stock jumped more than 10% in after-hours trade, but surrendered those gains by the end of the company's conference call, when Jassy said companies are being "cautious in their spending in this uncertain time" on cloud services. Still, the stock is up more than 25% so far this year.
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