• The value of Amazon's investments in Anthropic have soared.
• Amazon has agreed to invest $8 billion in Anthropic so far.
• Anthropic and Amazon have a close partnership that includes an arrangement to use AWS's AI chips.

Amazon is seeing massive gains from its investment in Anthropic.

The cloud giant estimated the fair value of its stake in Anthropic at $14 billion at the end of December, according to a recent regulatory filing. That's up from $8 billion, the filing shows.

That means Amazon's investments have soared roughly 75% since it started backing the AI startup in 2023, for a cool $6 billion gain on paper.

Amazon first invested $1.25 billion in Anthropic in September 2023 and another $2.75 billion in the first quarter of 2024. Late last year, Amazon put in another $1.3 billion, and also agreed to invest an additional $2.7 billion by the end of 2025, the filing stated.

Amazon's spokesperson declined to comment.

In the filing, Amazon said it used convertible notes to invest in Anthropic. These are classified as "available-for-sale," an accounting term generally denoting securities expected to be held for more than a year. Convertible notes can be exchanged for equity in the future, depending on how they are structured and certain thresholds.

There are a lot of assumptions baked into Amazon's fair value estimates. This is common for investments in startups, which are often young businesses that could either succeed or fail over the long term. Amazon's filing classified the convertible notes as "Level 3" assets, which use "valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants."

"These valuations require significant judgment," the company added.

Anthropic is one of the leading AI startups, best known for its Claude family of models and related services. The OpenAI rival is currently raising money at a $60 billion valuation, a significant jump from the $18 billion value it saw last year, according to the Wall Street Journal.

Amazon has built a close relationship with Anthropic in recent years. In addition to the funding, Anthropic agreed to use Amazon's cloud computing services and AI chips. Last year, Anthropic said it plans to use a new AI supercomputer made up of Amazon-made chip clusters.

Amazon's total investment value in public and private companies was $22.1 billion as of the end of December, the filing said. Publicly traded companies, such as Rivian, accounted for just $4.6 billion. Among the private companies Amazon invested in are Scale AI, Hugging Face, and X-energy, according to Pitchbook.

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• Amazon is adopting Zoom as its official meeting app, replacing its own Chime.
• Chime, launched in 2017, was Amazon's main meeting app and had limited external use.
• Amazon has also started rolling out Microsoft's 365 tools.

Amazon is making Zoom its official meeting application across the company, according to an internal memo obtained by Business Insider.

Zoom replaces Chime, Amazon's homegrown meeting application that can run video and audio calls, the memo said. Chime, which launched in 2017, had been the de facto official meeting app for Amazon's corporate employees.

"Zoom is replacing Amazon Chime as the standard meeting application for Amazon internal meetings," the memo said.

Amazon's companywide use of Zoom, which hasn't been previously reported, is a major win for the videoconferencing app maker, which lost most of the pandemic-driven stock price gains in recent years.

Amazon will deprecate the Chime application, partly because of its "limited" external use, the company's spokesperson said in an email to BI.

"When we decide to retire a service or feature, it is typically because we've introduced something better or our partners offer a solution that is a good fit for our customers as well as our own employees. In Chime's case, its use outside of Amazon was limited, and our partners offer great collaboration solutions, so we will lean into those," the spokesperson said.

Zoom's spokesperson didn't respond to a request for comment.

Amazon has also started rolling out Microsoft's 365 productivity tools internally, the memo said. Amazon has committed to spending $1 billion over five years to use M365, BI previously reported.

Amazon employees will migrate to Microsoft's cloud applications on a "rolling basis," the memo said, and they will gain access to services such as Outlook, Word, Excel, and PowerPoint.

The internal memo added that Microsoft Teams would be available for meetings where "full integration with M365 is needed," while Cisco Webex would work for meetings with customers who use Cisco's product.

In a separate blog post, Amazon wrote that Wednesday's change wouldn't impact Chime's software development kit, which lets customers build their communication applications.

Chime is the second product shutdown Amazon has announced this week. On Tuesday, the company said it was scrapping Inspire, a TikTok-style video and photo feed.

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• Amazon's retail CEO, Doug Herrington, said the company must cut costs to invest in new growth.
• The cost reductions focus on delivery inefficiencies to improve the cost of shipping a package.
• Amazon invests in AI data centers, warehouses, and fast shipping for future growth.

Amazon has to continue cutting costs if it wants to invest in new growth opportunities.

That's according to Amazon's retail CEO, Doug Herrington, who stressed the need to cut costs and invest in new ideas simultaneously during last month's internal all-hands meeting, which Business Insider obtained a recording of.

"We have to keep reducing costs so that we can afford the big investments in big new businesses," Herrington said.

Herrington was referring to Amazon's cost-to-serve of each shipment, a metric that measures the cost of fulfilling the shipment and moving it through the supply chain, and how the company could improve it by eliminating inefficiencies. Herrington said Amazon reduced the average cost-to-serve per unit because of its investments in delivery and customer service.

Herrington's remarks signal that Amazon's yearslong cost-cutting effort is likely to continue this year, even as it makes huge investments across the business.

Since late 2022, Amazon has laid off at least 27,000 people and shuttered several less profitable services and internal projects. Last month, Amazon let go of about 200 employees in its fashion and fitness group.

Those moves have resulted in record profits and cash balances for Amazon, a change that Wall Street has welcomed in recent years. At the same time, Amazon has made huge investments in data centers for AI and warehouses to make deliveries more efficient. In 2025, Amazon is expected to spend a record $105 billion in capital expenditures.

Amazon's spokesperson declined to comment on this story.

'Every single penny matters'

During the meeting, Herrington said cost reductions and new investments shouldn't be exclusive but complementary. He said they'd need to be "balanced" because the goal is to drive more efficiency.

"My suggestion would be for all the teams that if you find yourself only doing cost reduction with no invention and innovation, or if you find yourself only working on innovation and not thinking at all about how to become more efficient, then you probably don't have the right balance, and that it's up to all of us to make sure that within our team and within our portfolio of work that we're working on, we're doing both at the same time," Herrington said.

Herrington also said Amazon would continue to invest in fast shipping, such as same-day and drone delivery services, and keep expanding its product selection through the low-price service Haul and Fresh Grocery while adding brands to its marketplace. He added that Amazon was improving shopper convenience through personalized AI services such as Rufus.

Gail Carpenter, Amazon's retail chief financial officer, echoed the message during the meeting. She said the cost cuts helped Amazon invest in better shopping experiences, like faster delivery and lower prices. She said Amazon's recent investments in warehouses to serve smaller regions had saved transportation costs because packages travel shorter distances.

"As a reminder, this work isn't just about cost reduction — it enables us to invest in a better customer experience," Carpenter said. "When we reduce waste and inefficiency, we can offer faster delivery, better prices, and expand selection in a profitable way."

She added that Amazon had improved the average cost-to-serve on a per-unit basis for two straight years and was continuing the momentum in 2025 while encouraging employees to share more cost-saving ideas.

"We're in a game of pennies," Carpenter added. "Every single penny matters, so keep bringing your ideas forward."

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• Amazon invests billions in warehouse robotics, deploying more than 750,000 robots globally.
• Tye Brady, Amazon Robotics's chief technologist, believes robots help people work more efficiently.
• AI significantly boosts the potential of robotics in warehouses, he told BI in a recent interview.

Amazon has long been a leader in warehouse robotics, investing billions of dollars to automate some of the picking and sorting jobs at its fulfillment centers.

But its work in robotics is just getting started, Amazon Robotics Chief Technologist Tye Brady told Business Insider in a recent wide-ranging interview.

Amazon now has at least 750,000 robots roaming around its sprawling network of warehouses. It has been deploying robotic arm systems called Sparrow and Robin that can quickly lift and move millions of products and boxes.

This wave of automation is helping Amazon deliver packages faster, and it could make the company more profitable. Morgan Stanley recently estimated this robotics push could save Amazon up to $10 billion a year by 2030.

According to Brady, the goal is to help Amazon's frontline workers do their jobs more safely and efficiently.

"We do technology with a purpose. And if that purpose makes sense in e-commerce and our material handling fulfillment systems, then we will do that as long as it improves the safety of our employees and their performance," he said.

Brady, who has been at Amazon for almost a decade, saw the potential for robots in the logistics industry early on. He was part of a group that formalized the Amazon Picking Challenge, a grassroots competition that helped bring together a community of robotics experts. Before that, he worked at MIT and Draper Laboratory.

Brady said breakthroughs in artificial intelligence give Amazon more reason to invest in this space. In 2022, the company launched a $1 billion Industrial Innovation Fund focused on supply chains and logistics. In August, Amazon hired the founders of startup Covariant, a robotics AI startup last valued at $625 million.

"The physical AI part is hugely important," Brady said. "AI has really revolutionized and transformed robotics because it allows us to have the mind and body as one."

Brady doesn't dispute these advancements will change jobs in the future. But he argues that it will benefit the workforce, creating more skilled jobs and giving people more time to focus on things that "really matter."

"Our future is in people and technology working together," Brady said. "If we have technology that allows us to be more capable in our jobs, that's a win."

This Q&A has been edited for clarity and length.

BI: Amazon has more than 750,000 warehouse robots? Will all these be Amazon's own designs or a mixture of internal and external machines and systems that you get from other places?

"What's really awesome is that 750,000 is for our drive units alone. And I'm very proud that those have not only been designed inside Amazon but also manufactured by Amazon. So we manufacture every one of those drive units in Massachusetts in one of our two facilities.

We have our own manufacturing lines where we actually build those locally, and we ship those globally. And we've created a lot of jobs because of that manufacturing capability. We have a great talent pool around here. We actually source a lot of material even locally as well, proving that you can do this cost efficiently and very performantly here in the United States, which is great. And that's the world's largest fleet of industrial mobile robots out there."

BI: Any sense of where that number's going in the future?

"I would imagine it's only going north. I can't share the number yet.

If you went into a large fulfillment building, you'd see 3,000 to 4,000 different drive units working in coordination with each other. You would see 10, 20, 30 Sparrow arms working in coordination, picking up things. You'd see tens of Robin work cells picking up boxes. You'd see a couple hundred Proteus drives moving what we call go-karts around. They're everywhere. And you're also going to see a lot of people as well. So it's the idea of people and machines working together because when we do our robotics, we're extending and augmenting human capability."

BI: Why name your robots after birds?

"The designers get to pick whatever names they want, but it started with the first bird, which was Robin, which stands for 'robotic induct.' So our team said, hey, we're going to call this Robin. And then a whole bunch of birds started to come on."

BI: How much resources and money is Amazon putting into automating warehousing and logistics? Is it all focused on the kind of e-commerce operation, by which I mean warehousing and logistics, or also delivery and other parts of Amazon that we haven't thought of?

"To put a figure on it, would be nearly impossible for me to do. You could see the scale is if we're going to open an industrial fund of $1 billion, then we're serious about this. And we're seeing the real-world benefits for our employees today.

AI has changed the game of what products need to go where. We start even before the customer makes their order on Amazon.com. And then we offer a delivery promise that's backed by our amazing people and our robotic systems. And that delivery promise is a function of what we call 'first mile,' where we store our goods, our 'middle mile,' where we help sort those goods to get them to the right locations. And then our 'last mile' deliveries. And robotics is affecting all three of those phases significantly. And AI has changed the game for us and the robotic systems that we have continue to introduce more and more efficiencies in that process."

BI: Is there any task inside the warehouse and logistics process that will never be automated because they are too complex or something?

"Just plain old, simple common sense will never be automated. Humans have an amazing ability to adapt and understand what's going on and an amazing ability to use tools as long as they're available. As long as they're intuitive and natural and actually provide value, we'll use tools to do the job better and more efficiently. And for our case, it's safer.

I'm a systems engineer, and what we want to do is we want to leverage what people are good at. We're good at problem-solving, using common sense and reasoning, generalization, and creative thinking. We're amazing at that. I don't want to throw that away. Machines are really good at crunching numbers, assessing databases, and moving with precision. Let's bring those together in order to do the task at hand. And for us, that's moving our packages for our customers."

BI: Any thoughts on the resurgence of investment in robotics lately?

"The 'physical AI' part is hugely important. I think we've done a pretty good job of building the body in robotics. But let's think about the mind and the body, and AI has really revolutionized and transformed robotics because it allows us to have the mind and body as one.

We're doing things not in the digital world. We're doing real-world things applied in the analog world, the world that we live in. And there's no better example of that than what we're doing in Shreveport, Louisiana. We have 10 times the amount of robotics under that roof. The processing time is 25% faster. We can reduce what we call the cost to serve by 25% as well. We can pass those cost savings along to our customers and we're creating brand new jobs. That's a win all the way around because it's great for customers first and foremost, and it helps people do their jobs better. So, it's not a replacement strategy; it's an augmentation strategy.

We do technology with a purpose. And if that purpose makes sense in e-commerce and our material-handling fulfillment systems, then we will do that as long as it improves the safety of our employees and their performance.

That's what we want to do, and we've done that. I can give you lots of examples, whether it's in our Sequoia system, our Proteus system, our Sparrow system, or our Robin system. All those systems allow for safer employees and more efficiency in our fulfillment processes."

BI: What's the next challenge? What's the next frontier specifically in your e-commerce logistics world?

"First of all, physical AI is here and proving very useful, but we're just getting started. And I am really excited about the scale at which we operate, which is mind-boggling. And that scale allows us to advance the technologies of physical AI. That's really exciting. When we ship billions and billions of packages every year, that makes you have to do it right because you can't be 99% good because a 1% exception rate over billions of items is quite a lot of things that you would then have to specially handle."

BI: Would Amazon ever consider providing a lot of this physical AI robotic technology as a service to other companies? Or are you already doing that?

"We are doing that in a sense through AWS. Our physical AI systems have the same toolkits that hundreds of thousands of our customers have available to them, and they're using them, so we're seeing a lot of growth there. So it's an incredible system, how AWS has structured it and made it available to all [through Bedrock].

We're always finding ways to evolve retail. That's what we do. That innovation mindset, that experimentalist mindset, allows us to achieve what we have. Whether it's helping our productivity, this idea of mind and body being unified inside our robotic systems is really exciting. These advancements that we're seeing, especially with Covariant, helping drive the mind, that is really exciting. How automation is empowering people. Our mission continues to be, I want to eliminate the menial, the mundane, and the repetitive. I want to eliminate those tasks and allow people to focus more on what matters."

BI: Tell us more about Covariant.

"It's a really broad brush approach to foundation models and how they should be applied, but with specific needs. Whether it's path planning or perception systems for robots to understand their world, we're seeing some significant advancements in those areas.

Generative AI is fueled by data and we have lots and lots of data from our objects. We offer the world's largest selection of goods to our customers out there and are the generative AI models that really changed the game when it comes to efficient planning. The movement of robots when it comes to understanding the scenes that the robots are in. And systems like Proteus, for example, these are 'in the wild.' They are around people, they're not behind fences, they're moving in concert with people, and understanding the environment is really important in a quick manner. And their generative AI systems are changing the game for us."

BI: And that example for Proteus, that's in a warehouse, not following a preordained path, it's just out there?

"That's right. It's out there around people. People move around it. It moves around people. It's really, really cool to see, and I can show you just one example of how state-of-the-art it is. Typically a robot, when it sees maybe three, four, or five people gathered together, it'll just stop and wait for the folks to kind of disband. Or if you're at a cocktail party, when you're trying to navigate from one side of the room to the other, you know how hard that can be. The Proteus system actually is capable of that. So it doesn't just stop. What it does is it kind of nudges its way, never run into anything, but it has its way of signaling to people 'I would like to get through,' and then it can kind of navigate its way through that cocktail party in a very safe manner. That's really hard to do.

It's all about intent. We need to build in our models ways for people to understand the intent of the robot. I want to take a left turn, I want to move. So we have eyes and lights that allow a person to understand the robot's intent. But we also program the robotics to understand the person's intent. If they're walking, are they going to take a left turn, so we want to make sure that we keep the right buffer around them? Maybe they're going to stop really quickly. We have to be mindful of that as well. And our physical AI systems that are doing that today have really changed the game. When it comes to understanding and perceiving those scenes that are immediately around it."

BI: And Covariant helps with all these things?

"Absolutely. So it's a balance between what we call edge computing. So that's the software that we run directly on the machine itself, and then also our cloud computing that we have through AWS where we have these foundation models that are helping us extract what's a door and what's a fence and what's the dock look like and what's a truck, and all that knowledge we are assembling.

They're great. I mean, they're a leading robotics company for sure. Really excited about it. The way that they have done their models is kind of unique and we think that they can really help assist people. So that's a great partnership."

BI: Do you think robotics will at least slow down the massive growth of this human warehouse workforce from the past 10, 15 years or not?

"Inside our Shreveport building, we have 35% more skilled jobs. So the labor force is changing. We have also committed more than $1.2 billion in our upskilling pledge. We offer things like career choices. We offer things like apprenticeships and prepaid tuition programs for our employees inside our fulfillment centers for upskilling. That's really important.

It is really important for us to do this because we know jobs will change, and we want to keep those skills local in the community where we're creating those jobs. Our future is in people and technology working together.

And the perception of technology really matters. It really matters to people because if you are more willing to adopt technology and use it, then you get the benefits of technology.

And people, when they have technology, can do really amazing things. When you're in India, if technology allows you to have cleaner water, that's a win. That's a loss for nobody. That is a win. If you have technology that makes you healthier and safer, that is a win. Let's embrace that. If we have technology that allows us to be more capable in our jobs, that's a win.

It's exactly the way I feel about robotics. But instead of being in the digital world, it's in the physical world. Let's allow people to do great things to be more efficient. It's why I got into robotics. When you do robotics right, it allows us to be more human. And I mean physical AI, I mean smart, capable technology systems that allow us to be more human, more capable. If I can have a robot do my dishes for me, which I do, it's called a dishwasher, and that's great. It's such a good robot that we don't really talk about the robot, but what it does is very simple. It allows me more time to connect with my loved ones. The menial and mundane, go ahead and do it. Mow my lawn, do my pool, whatever it is, give me more time to be more human.

I'm not going to run out of things to do on the weekend. I can guarantee you that. There's no replacing me over the weekend. But if I can have machinery and physical AI systems doing these tasks for me that allow me to focus more on what matters at home, that's my loved ones, that's a total win.

I definitely believe that what we're doing inside Amazon, applying robotics and physical AI in many, many systems, is helping master the fundamentals of robotics, whether it's a movement system, a manipulation system, a sortation system, a storage system, an identification system, or a packaging system.

That's what we're focusing on. When we achieve those things, what's going to happen is that the world will see in this particular industry that robotics can really help people do their jobs, and that will start to transform other industries. You're going to see the healthcare industry pick up on physical AI. You're going to see agriculture pick up on physical AI.

And we are pioneering that field, which is as simple as storing goods, picking goods, moving goods, and bringing them to customers. But that context allows us to accelerate the development of robotics."

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• Amazon Web Services growth hindered by capacity constraints in data centers, says CEO.
• Constraints stem from AI chip shortages, server components, and energy supply issues.
• Amazon plans $105 billion in 2025 capital expenditures, largely led by AI.

Amazon CEO Andy Jassy said on Thursday that the Amazon Web Services cloud business could grow faster if not for "capacity constraints" across its data centers.

He said the shortage has been caused by difficulty procuring AI chips, server components like motherboards, and the energy to power data centers.

"It is true that we could be growing faster, if not for some of the constraints on capacity," Jassy said during Thursday's call with analysts.

On Thursday, AWS reported a 19% increase in sales for the fourth quarter at $28.8 billion, which was slightly below street estimates. Amazon's stock dropped roughly 4% in after-hours as the company gave lower-than-anticipated first-quarter guidance.

Jassy's remarks echo recent statements made by cloud rivals Microsoft and Google. Microsoft's CFO Amy Hood said last week that the company is in "a pretty constrained capacity place" when it comes to meeting demand, while Google's leadership said on Tuesday that it ended 2024 with "more (AI) demand than capacity."

Jassy said on Thursday that he expects the constraints to "relax" in the second half of 2025, adding it is "hard to complain" when AWS's AI business is on pace to generate "multi-billion" dollars in annual sales.

Amazon expects AI demand to continue growing. For 2025, the company forecast roughly $105 billion in capital expenditures, mostly in data centers, after spending a record $26.3 billion during the fourth-quarter.

Jassy said AWS doesn't make that kind of financial commitment unless there are "significant signals of demand."

"When AWS is expanding its capex, particularly what we think is one of these once-in-a-lifetime type of business opportunities like AI represents, I think it's actually quite a good sign, medium to long term for the AWS business," Jassy said.

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• Amazon recently changed some of its DEI websites and halted some programs.
• An AWS VP clarified Amazon's continued commitment to DEI in a meeting in late January.
• Other firms such as Meta and Target recently pulled back on DEI efforts.

An Amazon executive told employees the company remains committed to diversity, equity, and inclusion, during a recent internal meeting.

The tech giant has changed some of its websites about DEI and halted some programs. That prompted some employees to ask about this ahead of the meeting in late January with Mai-Lan Tomsen Bukovec, VP of technology at Amazon Web Services.

The question about DEI received the highest interest among employees, Tomsen Bukovec noted, according to a meeting transcript obtained by Business Insider.

The AWS executive said she wasn't aware of the changes to Amazon's DEI websites. She said she asked internally to ensure that Amazon was still committed to its DEI programs. The feedback she received was "no change," she said.

"We are not pulling back on DEI initiatives. I looked at all the changes. We are not making any changes to any of the benefits," Tomsen Bukovec added. "There's no change to the commitment, but we didn't roll it out that well."

Tomsen Bukovec, who's been at AWS for almost 15 years, is a senior, high-profile executive at the cloud division. She often speaks on behalf of the company at public events and was one of the speakers at last year's re:Invent conference. In 2023, Tomsen Bukovec was included in BI's AI 100 list.

Other companies, including Meta, Target, and McDonald's, have pulled back or ended DEI programs in recent months as pressure from conservative activists and Donald Trump's administration increased. At the same time, other companies, such as JPMorgan and Costco, are continuing support for DEI.

Media reports in recent months have suggested that Amazon's approach to DEI may be changing.

In December, Candi Castleberry, Amazon's VP of inclusive experiences and technology, said the company was shutting down several "outdated" DEI programs to focus on those with "proven outcomes," according to Bloomberg. Amazon also recently removed or changed some words about its DEI benefits on some of its websites, The Information previously reported.

During the late January staff meeting, Tomsen Bukovec said Amazon consolidated some words and dropped some paragraphs from its DEI websites and blogs. But the company "didn't change the underlying capabilities that people can do, and we did not change any of the commitment that we have to the programs," she said.

She specifically addressed a transgender benefit that Amazon offers and said "we are not making any changes to that."

"We just made some changes to the words, and then I think we deprioritized one or two programs that were not making much of a difference anyway," she added.

Amazon's spokesperson declined to comment on the specifics of this story but shared a link to the company's policy positions that show its commitment "to creating a diverse and inclusive" culture.

The spokesperson also shared a copy of Castleberry's December email that said, "We remain dedicated to delivering inclusive experiences for customers, employees, and communities around the world."

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• Amazon could face a significant impact from Donald Trump's new tariffs on Chinese imports.
• Morgan Stanley estimates Amazon to be the most-exposed among e-commerce companies the bank covers.
• A large chunk of Amazon's third-party sellers are also China-based.

Amazon could be one of the hardest-hit e-commerce retailers by new tariffs on imports from China.

Morgan Stanley wrote in a note on Monday that roughly 25% of the cost of products directly sold by Amazon come from China, exposing them to the new tariffs. Those items sold by Amazon, called first-party merchandise, account for a little less than half of all products sold on Amazon. Third-party merchants sell the rest through Amazon's marketplace.

Amazon's exposure to the tariffs is higher than other e-commerce companies covered by Morgan Stanley. The note estimates that the average exposure to China among those e-commerce companies is a little over 10%. Fashion retailer Revolve had the second-highest exposure among these companies at 22%. Peloton, Etsy, and Figs are estimated to have less than 3% of their products from China.

"AMZN's 1P business & RVLV have the highest exposure while PTON, ETSY & FIGS are at the low end," Morgan Stanley wrote in the note.

US President Donald Trump announced new tariffs on imports from some countries including China over the weekend. That included a 10% tariff on goods from China. He also took aim at a loophole in US customs law, known as the de minimis exemption, that let importers avoid duty and tax on direct shipments from China worth less than $800.

Almost half of Amazon's 10,000 largest third-party sellers are China-based, according to Marketplace Pulse. That means the new tariffs could affect an even bigger share of products sold on Amazon.

Amazon's spokesperson declined to comment.

Morgan Stanley's note on Monday also shared the methodology it used to estimate the China exposure rate. In Amazon's case, it estimates roughly two-thirds of all first-party inventory costs are for non-grocery and consumer products, of which 40% originate from China.

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• Amazon wants fewer managers.
• Internal guidelines for a big sales team at AWS give a glimpse into its plans.
• Amazon's reorg reflects a broader trend in corporate America to trim middle managers.

Amazon's effort to whittle down middle-management is taking shape.

The company recently told some managers to increase their direct reports, make fewer senior hires, and down-level or cut pay for some employees, according to people familiar with the matter and internal guidelines shared with a large sales team at Amazon Web Services.

In September, Amazon CEO Andy Jassy announced a plan to increase the ratio of individual contributors to managers by 15% by the end of March. By reducing management layers, the company hopes to "decrease bureaucracy" and "move fast," Jassy said at the time.

The internal guidelines give an early glimpse into how Amazon intends to complete a management shake-up that could impact thousands of corporate employees. Amazon hasn't shared anything publicly since unveiling plans to have fewer managers last year.

In an email to BI, Amazon's spokesperson said the internal guidance document might be true for a specific team but not for the whole company. Individual units communicate directly with employees as they make changes to their structures under the broad mandate of creating "customer-centric, agile organizations that empower fast decision-making," the spokesperson added.

Minimum 8 direct reports

One key point in the AWS team guidelines document obtained by BI is to put at least 8 direct reports under each manager. The new "span of control" directive is an increase from a minimum of 6 direct reports each manager had in the past, according to the guidelines said.

It's not the first time Amazon has made changes like this. In 2017, Amazon founder and former CEO Jeff Bezos asked every manager to have at least 6 direct reports as part of a plan to "de-layer" the company.

The latest mandate has made some employees concerned enough to ask questions about it. At an internal all-hands meeting in November, Jassy addressed the issue, saying Amazon went on a massive hiring spree during the pandemic, which "stretched" the company and led to slower decision-making, BI previously reported.

"I hate bureaucracy," Jassy said during the meeting.

Amazon's spokesperson told BI that the ideal team size will vary, and no companywide mandate requires all managers to have a certain number of direct reports. The spokesperson added that a full-time employee with one or more direct reports is considered a manager "in title," regardless of the number of direct reports they have.

Pause hiring new managers

The guidelines for the AWS sales team also require pausing new manager hires. This is temporary until the team understands the full ramifications of the organizational change, the guidelines said.

This particular AWS team has discussed hiring fewer middle managers since at least April of last year, according to another internal document obtained by BI. The team found that the hiring pace of middle managers had outpaced entry-level employees in recent years, resulting in increased costs. The document recommended hiring more early-career professionals to shift the team's structure from a "diamond"-shaped organization to a "pyramid" shape where more than half the team is concentrated in lower-level positions.

This trend is happening in other parts of corporate America. Besides Amazon, companies including Meta, Citi, and UPS have made changes to trim supervisory roles. Data from last year showed that companies are cutting middle managers and not backfilling those positions.

Another Amazon internal guideline from September, previously obtained by BI, said the manager reduction plan could result in role eliminations as "organizations may identify roles that are no longer required." In a note published last week, Bank of America analysts estimated that Amazon could save roughly $1.5 billion in annual costs from the manager cuts.

Amazon's spokesperson said the company adjusts hiring based on business needs, and it continues to have open manager roles available. The spokesperson added that there are many ways to reduce the number of managers without terminating them, such as by reconfiguring teams or reassigning employees.

Down leveling

Another aspect of the plan is to down-level some of the managers to individual contributor roles, according to the recent guidelines for the AWS sales team. Two current AWS employees told BI that several managers have been pushed down a level due to the new approach. That meant being moved to a smaller pay band, one of the people said.

One former employee who left recently said the promotion criteria are changing. This person said some AWS teams now require managers to have more people under them to qualify for a promotion.

Amazon's spokesperson told BI that moving from an individual contributor to a manager role, or vice versa, can happen without changing levels. There's no companywide requirement for team size to get promoted as the promotion criteria involve many factors, the spokesperson added.

For several Amazon employees who spoke to BI, the reorganization is creating a bigger problem: a culture of fear. They said managers seem to shy away from taking risks or making hard decisions because they don't want to be held accountable for failures, which could make them a target of the cuts.

"No one wants to be the one that failed," one of the people said.

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• DeepSeek's AI models have taken the tech industry by storm in recent days.
• More than 20 big AWS customers have asked Amazon for access to DeepSeek models: internal document.
• AWS's strategy focuses on offering diverse AI models, unlike competitors that prioritize their own.

Big Amazon cloud customers have been pressing the tech giant to give them access to DeepSeek's AI models, the latest sign of the Chinese startup taking the tech world by storm.

More than 20 key clients of Amazon Web Services asked the company to make DeepSeek models available through Amazon's Bedrock AI development tool this weekend, according to an internal document obtained by Business Insider.

Toyota, Stripe, Cisco, Yelp, and Workday were among AWS customers asking for this access, with many wanting to test and evaluate DeepSeek's AI capabilities internally. Other companies that made similar requests include Mercado Libre and Kellogg, the document showed.

An Amazon spokesperson told BI that Bedrock customers use multiple models to meet their unique needs and the company remains focused on "providing our customers with choice."

"We are always listening to customers to bring the latest emerging and popular models to AWS," the spokesperson said.

Spokespeople for Stripe, Cisco, Yelp, Workday, Toyota, Mercado Libre, and Kellogg didn't respond to requests for comment.

DeepSeek recently rolled out AI models that are on par with, or better than, some of Silicon Valley's top offerings — at a fraction of the cost. Its cheap pricing, strong performance, and compute-efficiency have raised questions about US tech companies' massive spending on competing products.

Tech stocks, including Nvidia, Broadcom, and TSMC, plunged on Monday as investors tried to assess the long-term implications of DeepSeek's initial success.

Amazon shares dropped early on Monday trading, but rallied during the day to end up 0.2%.

The moves highlight Amazon's strategic advantage in the generative AI race. From early on, AWS focused on providing customers with as many AI models as possible through Bedrock, believing that no one model would dominate the market.

That's a contrast to other tech companies, such as OpenAI and Google, which have spent heavily on building their own frontier AI models.

AWS still has an internal AGI team developing its own AI models, and the company unveiled the latest version, Nova, in December. However, Amazon has mostly prioritized offering a range of other AI models through the cloud.

Amazon often makes decisions based on customer feedback, and the company is likely considering making DeepSeek's models available through Bedrock after such a flood of client requests, according to a person familiar with the matter.

One AWS employee told BI that the company is not in "panic" mode over DeepSeek like some other tech companies. If DeepSeek's models are good, "we'll just host it on Bedrock," this person said. They asked not to be identified discussing private matters.

"We expect to see many more models like this — both large and small, proprietary and open-source — excel at different tasks," the Amazon spokesperson told BI, while noting that customers can access some DeepSeek-related products on AWS through tools such as Bedrock.

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• Amazon has restarted the green card application process for foreign workers.
• Amazon paused PERM filings in 2023-2024 due to "labor market conditions."
• The change may signal an improving job market, analysts say.

Amazon has resumed the green card application process for foreign workers, a sign of an improving job market.

In an internal note from late 2024, obtained by Business Insider, Amazon told employees that it planned to reopen PERM processing on January 6, 2025. Amazon had suspended all new PERM filings in 2023 and throughout 2024, BI previously reported.

PERM is part of the US Labor Department's permanent labor certification process and is typically the first step towards getting a green card for a foreign worker. The goal is to prove hiring foreign workers won't impact US job seekers's opportunities, wages, or working conditions.

The note didn't explain why Amazon is resuming the PERM process. But, the change potentially reflects Amazon's outlook for a more competitive job market. It also follows Trump's campaign vow to give green cards to every foreign graduate of US colleges.

"We evaluate our PERM program based on market analysis and have been planning to reopen it for the last 9 months," Amazon's spokesperson said in an email to BI.

'Rebound' from the layoffs

Amazon has been making major job cuts since late 2022, laying off at least 27,000 employees. Just last week, Amazon let go about 200 people from its Fashion and Fitness group, BI reported.

Resuming PERM filings indicate Amazon sees a possible "rebound" in the job market, according to Richard Herman, a Cleveland-based immigration lawyer and founder of the Herman Legal Group.

Herman said some companies previously suspended green card filings due to widespread layoffs and the high cost and time of processing PERMs with the Labor Department.

With PERM, companies have to demonstrate that laid-off employees are not qualified for the jobs intended for foreign workers while also notifying US workers laid off within the past 6 months about the anticipated PERM filing. That costs a lot of money and time.

"If employers are reconsidering getting back into the PERM game, it's because their cost/benefit analysis suggests labor market changes favor a more competitive market in some occupations, justifying the costs/time invested in PERM," Herman said.

Tech companies are still laying off employees and applying more stringent performance reviews. But the hiring trend may improve.

HR software maker Karat said in a 2024 report that average hiring targets for software engineer roles among US tech companies were up 12% year-over-year. Stripe laid off 300 employees earlier this week but said it plans to grow its total head count by roughly 1,000 this year, BI previously reported.

"Tech in the Bay Area is definitely hiring more, and so they have a positive view of what's ahead," Bill Hing, an immigration law professor at the University of San Francisco told BI.

Trump effect

President Donald Trump may be another factor.

During his presidential campaign, Trump mentioned that he would like to give green cards to every foreign graduate of US colleges as part of a plan to attract more skilled immigrants.

That has led to a clash between the Elon Musk-led pro-Trump tech leaders and the hardcore MAGA base over the legal immigration of skilled workers.

While it's possible Trump will commit to his proposal, he hasn't publicly addressed it since then, and some believe he could change his mind. Trump's campaign, in fact, clarified last year that his proposal would only apply to the "most thoroughly" vetted foreign students.

Jennifer Gordon, a labor and immigration law professor at Fordham University, told BI that companies may be trying to anticipate Trump's unpredictable behavior in advance.

Given Trump's past hard-line stance against immigration, Gordon said it's possible the new administration could issue a policy pausing skilled labor immigration applications in the future.

"If I was a tech company, I wouldn't be fully confident that he will follow through," Gordon said.

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• Most Amazon corporate employees started working in the office five days a week in January 2025.
• Some employees reported issues such as lack of desks, full parking lots, and office theft.
• Others are keen to re-connect with colleagues. "You just can't recreate these connections online."

Amazon's five-day return-to-office mandate is off to a bumpy start.

Employees who spoke to Business Insider said the new office policy, which kicked off at the beginning of the year, has resulted in full parking lots, a lack of desks and meeting rooms, and items being stolen from desks.

While some employees praised the new policy as more face-to-face interactions have at times resulted in better collaboration, others say they still spend much of their time on video chats and in other virtual meetings.

BI spoke to seven current Amazon employees about the new office mandate. The employees also shared screenshots of group Slack messages and other private communications.

"Please go back to RTO3," one Amazon employee wrote on Slack, referring to Amazon's previous policy that allowed staff to work two days a week from home. "Or allow employees the option to WFH if they have the proper set up and they are high performers."

That Slack post garnered at least 22 supportive emojis from other Amazon colleagues.

Change is hard

Amazon has 1.5 million workers, of which roughly 350,000 are corporate staff. So those people who are openly complaining about the full RTO experience represent a tiny fraction of the company's workforce.

Some of the complaints may be a natural reaction to what is a drastic change of daily life for thousands of employees who slowly got used to working from home in the pandemic, and now must adjust again to a new reality.

Peter Cappelli, director of Wharton's Center for Human Resources, told BI that forcing employees to return to the office can stoke resentment. But even if management does a poor job with the transition, employees cannot do much because RTO is often "painful." And quitting isn't an option as fewer companies offer remote work these days, he noted.

"Employers have all the power here," Cappelli added.

Some Amazon employees are RTO-happy

Not all Amazon employees are grumpy about working in the office every day of the week.

BI asked Amazon for examples of employees who are positive about the full return to office. The company's press office shared thoughts from two employees.

Rena Palumbo, an Amazon Web Services employee, said re-establishing human connection with colleagues has been important, and she's now more excited about working with them.

Cash Ashley, another AWS employee, said face-to-face interactions have been crucial for building work relationships and creating mentorship opportunities. He said RTO also helps with work-life balance because there's a clear separation between work and home.

"You just can't recreate these connections online," Ashley said.

In an email to BI, Amazon's spokesperson said the company is focused on ensuring the transition is "as smooth as possible."

"While we've heard ideas for improvement from a relatively small number of employees and are working to address those, these anonymous anecdotes don't reflect the sentiment we're hearing from most of our teammates," the spokesperson said. "What we're seeing is great energy across our offices, and we're excited by the innovation, collaboration and connection that we've seen already with our teams working in person together."

CEO Andy Jassy said last year that the new policy is meant to improve team collaboration and "further strengthen" the company's culture. AWS CEO Matt Garman also told employees in October that 9 out of 10 people he spoke to were "excited" about the change.

Lack of desks and meeting rooms

Most of Amazon's corporate employees started following the five-day office return mandate in early January. There are some signs that the company wasn't fully prepared for the logistical challenges.

Some workers found there weren't enough desks and had to track down space in a cafeteria or a hallway, two employees told BI. Others said there weren't enough chairs in offices and meeting rooms.

There's also been a shortage of meeting rooms, one of the people said. Some people got used to speaking openly about private topics while working from home. Now they're surrounded by colleagues in the office, so they are unofficially slipping into meeting rooms and phone rooms to conduct these conversations, this person said. That's clogged up meeting spaces and left some managers having private chats in open areas for everyone in the office to hear.

Full parking and shuttles

Some Amazon employees complained on Slack that when they drove to the office they were turned away because company parking lots were full. Others said they just drove back home, while some staffers found street parking nearby, according to multiple Slack messages seen by BI.

One employee from Amazon's Nashville office said the wait time for a company parking pass is backed up for months, although another staffer there said the company was providing free commuter passes which they described as "incredibly generous."

Another Amazon worker said some colleagues are joining morning work meetings from the road because the flood of extra employees coming to the office is making commutes longer.

Other staffers said they were denied a spot on Amazon shuttle buses because the vehicles were full, according to one of the Slack messages viewed by BI.

Signs of strain

With so many Amazon employees spread out across well over 100 locations around the globe, getting everyone back into an office smoothly is going to take more than a few weeks.

Indeed, Amazon delayed full RTO at dozens of locations, with some postponed to as late as May, due to office capacity issues, BI previously reported. Amazon subsidiaries, such as One Medical and Twitch, have also delayed or received exemptions from the five-day office-return policy, BI reported.

"Our upper 'leadership' has botched this so hard along with so many other things. Makes one wonder what other poor decisions will impact the company in the coming year," an Amazon worker recently wrote on the company's Slack.

Amazon's spokesperson told BI that the company is ready for the vast majority of employees to be back in the office.

"As of early January, the overwhelming majority of our employees have dedicated workspaces and have returned to the office full time," the spokesperson said. "Of the hundreds of offices we have all around the world, there are only a relatively small number that are not quite ready to welcome everyone back a full five days a week."

Office thefts and daily shower reminders

In some cases, basic office etiquette seemed missing as staff returned in the first week or so of January.

Several employees at Amazon's Toronto office complained of their personal belongings being repeatedly stolen from desks, according to the Slack messages.

One person complained that a keyboard and mouse placed on their assigned desk had gone missing, while another urged employees to keep their possessions in a safe place.

"Despite being adults that are well-paid, it's shameful that we can't trust each other with leaving personal belongings unattended," one worker wrote on Slack. An Amazon spokesperson declined to comment when BI specifically asked about this issue.

An office "survival guide"

On Blind, which runs anonymous message boards for corporate employees, Amazon staffers posted an "essential survival guide," offering tips for colleagues coming back to the office.

"Operation: Don't Be The Office Menace" listed several dos and don'ts for working around other people.

"Deploy personal hygiene protocols BEFORE leaving your launch pad (home). Yes, that means actually using the shower you've been avoiding since WFH began," read one piece of advice for office life at Amazon.

Another urged colleagues to keep the toilets tidy. "The bathroom stall is not a 'serverless' environment. Flush after use — it's called 'garbage collection' for a reason."

A third tip focused on the types of shoes to wear in the office. "Footwear is not optional. This isn't a beach sprint retrospective — keep those toes contained in their proper containers (shoes)."

'Very little team discussion'

RTO has been one of Amazon's most contentious issues over the past couple of years. Tens of thousands of Amazon employees signed internal petitions opposing the mandate, while internal Slack channels blew up with questions about the change. Jassy has had to address the issue repeatedly during internal all-hands meetings.

This month, some employees were still questioning the logic behind the policy. They said being in the office has so far had little effect on their work routine and has not generated much of a productivity gain.

A considerable portion of their in-office work is still being done through video calls with customers who are located elsewhere, these employees told BI.

Many Amazon colleagues are based in other office locations, so face-to-face meetings still don't happen very often, they added.

"Very little team discussion while here," one employee wrote on Slack.

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• At Amazon, a shadow advisor is a quasi-chief of staff who joins almost every CEO meeting.
• The position is one of the top jobs at the company.
• Former shadow advisors have gone on to huge roles at Amazon, including Jassy himself.

Amazon CEO Andy Jassy has a new "shadow" advisor, according to an internal organizational chart obtained by Business Insider.

This role is a quasi-chief of staff position at Amazon. Formally called "technical advisor," it's one of the most desirable jobs at the company because this person joins the CEO in almost every meeting and call. It typically lasts about 18 to 24 months.

Shadow advisors often go on to hold top positions at Amazon once their tenure ends. Jassy, for example, was Jeff Bezos's shadow advisor early in his career. Others include Amit Agarwal, Amazon's India chief, and Jay Marine, who leads Prime Video's sports streaming business.

This time, Alex Dunlap has taken on this prized role, the org chart shows.

Dunlap is a 17-year veteran of Amazon Web Services who most recently served as VP of productivity apps. He started as Jassy's shadow advisor in late 2024, replacing Eric Rimling, a logistics VP who was Jassy's shadow since January 2023.

Dunlap's appointment coincides with Amazon's renewed focus on business applications, also known as software-as-a-service. AWS has market-leading cloud infrastructure services, like computing and storage, but has not yet built an equally strong presence in the lucrative SaaS market.

Last year, Amazon moved Colleen Aubrey, a longtime advertising executive, to oversee its business applications group. Dilip Kumar, another high-profile executive who launched Amazon Go stores, is now in charge of Amazon Q, an AI application for developers and other business customers.

AWS has built many business applications throughout the years with mixed results. Bedrock, an AI development tool, and Connect, a call center application, have shown early success. Meanwhile, the file storage app WorkDocs failed to gain much traction, and the app-building software service Honeycode was shut down.

An Amazon spokesperson declined to comment.

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• AWS plans to reduce spending on ZT Systems as it designs more data-center gear in-house.
• AWS has been designing more data-center components itself to improve efficiency.
• AWS remains the largest cloud provider, with significant capital expenditures planned for 2025.

Amazon Web Services plans to cut back on one key supplier as it designs more data-center components in-house.

AWS is scaling down its spending with ZT Systems, an AI-infrastructure company that AMD agreed this year to acquire, Business Insider has learned.

A confidential Amazon document from late last year obtained by BI estimated that AWS spent almost $2 billion last year on ZT Systems, which designs and manufactures server and networking products.

The document said some of AWS's "server and networking racks" were "transitioning" to a custom hardware approach where it designs this equipment itself. This change, the document said, has the "potential to impact spend" with ZT Systems.

Two current AWS employees familiar with the relationship also told BI recently that AWS was reducing spending on ZT Systems. One of the people said the cutback could happen in phases over a long period because ZT Systems is tightly integrated with AWS servers. They asked not to be identified because of confidential agreements.

An AWS spokesperson told BI that the company continued to have a business relationship with ZT Systems.

"Across AWS, we are relentless in our pursuit of lower costs and improved performance for customers, and our approach to our infrastructure is no different," the spokesperson said in an email. Spokespeople for AMD and ZT Systems didn't respond to requests for comment.

AWS has in recent years been using more homegrown data-center components, where it sees an opportunity to save costs and improve efficiency. This helps AWS because it doesn't have to buy as much from outside suppliers that mark up their offerings to make a profit. In turn, AWS can reduce prices for cloud customers. AWS now uses various custom data-center components, including routers and chips.

AWS is the world's largest cloud computing provider, so any change in its spending behavior is closely followed by the tech industry. AWS's spending on individual suppliers can fluctuate, and any one change doesn't mean AWS is pulling back on its data-center investments. In fact, Amazon is expected to spend $75 billion on capital expenditures this year, and even more in 2025, mostly on AWS data centers.

AMD agreed to acquire ZT Systems in August for $4.9 billion. The company is best known for designing and manufacturing server racks and other gear to help run data centers.

AWS could still send in-house designs to ZT to be manufactured. AMD has said it plans to sell ZT Systems' manufacturing business after the acquisition closes.

In recent months some AWS employees have discussed concerns about working too closely with ZT Systems since AWS and AMD offer similar AI-chip products, one of the people said.

AWS has for years been a close partner of AMD. The cloud giant sells cloud access to AMD CPUs but hasn't made AMD's new AI chips available on its cloud servers, partly because of low demand, an AWS executive who talked to BI recently said.

It's relatively common these days for big tech companies to design custom hardware. Nvidia, for example, acquired Mellanox for $6.9 billion in 2019 to offer its own data-center networking infrastructure. Other cloud giants, including Google, also design their own chips and networking gear.

AMD said in August that ZT Systems would help "deliver end-to-end data center AI infrastructure at scale."

"AWS and AMD work together closely, as we continue to make AWS the best place to run AMD silicon," AWS's spokesperson told BI.

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• Andrej Karpathy recently suggested AI could enhance e-book reading with interactive features.
• Amazon may already be thinking about this for its Kindle e-books.
• The company is looking for an applied scientist to improve the reading and publishing experience.

The AI pioneer and OpenAI cofounder Andrej Karpathy thinks AI can significantly improve how people read books. Amazon may already be thinking about how to do this for its Kindle e-books business.

In a series of posts on X this week, Karpathy proposed building an AI application that could read books together with humans, answering questions and generating discussion around the content. He said it would be a "huge hit" if Amazon or some other company built it.

A recent job post by Amazon suggests the tech giant may be doing just that.

Amazon is looking for a senior applied scientist for the "books content experience" team who can leverage "advances in AI to improve the reading experience for Kindle customers," the job post said.

The goal is "unlocking capabilities like analysis, enhancement, curation, moderation, translation, transformation and generation in Books based on Content structure, features, Intent, Synthesis and publisher details," it added.

The role will focus on not just the reading experience but also the broader publishing and distribution space. The Amazon team wants to "streamline the publishing lifecycle, improve digital reading, and empower book publishers through innovative AI tools and solutions to grow their business on Amazon," the job post said.

3 phases

Amazon identified three major phases of the book life cycle and thinks AI could improve each one.

• First up is the publishing part where books are created.
• Second is the reading experience where AI can help build new features and "representation" in books and drive higher reading "engagement."
• The third stage is "reporting" to help improve "sales & business growth," the job post said.

An Amazon spokesperson didn't immediately respond to a request for comment on Friday.

'I love this idea'

There seems to be huge demand for this type of service, based on the response to Karpathy's X post.

Stripe CEO Patrick Collison wrote under the post that it's "annoying" to have to build this AI feature on his own, adding that it would be "awesome when it's super streamlined."

Reddit's cofounder Alexis Ohanian wrote, "I love this idea."

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• Evercore says Amazon Pharmacy's revenue may hit $2 billion this year.
• Interest in Amazon's online pharmacy service rose to 45% in Evercore's survey from 34% last year.
• The US prescription market is worth about $435 billion.

Amazon's online pharmacy business is drawing significantly more customer interest, and it could generate roughly $2 billion in revenue this year, according to the financial firm Evercore.

In a note published last week, the Evercore analyst Mark Mahaney highlighted his firm's recent survey indicating rising interest in and usage of Amazon Pharmacy.

A record 45% of Amazon customers surveyed said they were "extremely interested" or "very interested" in buying online medications from the company, up from 34% last year and from 14% in 2020. The note said it was the largest year-over-year increase in purchase intent for pharmaceuticals among Amazon shoppers in eight years. Evercore ran the survey in June and included 1,100 respondents.

The survey also found that 13% of Amazon customers said they had purchased pharma products from Amazon, compared with 9% last year.

Evercore estimated, based on "several sources," that all this could result in roughly $2 billion in revenue for Amazon's pharmacy business. Business Insider previously reported that Amazon's internal forecast showed its pharmacy business generating $1.8 billion in sales after recording $1.25 billion last year.

Amazon's growth is squeezing retail pharmacy businesses too. On Tuesday, The Wall Street Journal reported that Walgreens was in talks to sell itself to a private-equity firm.

Evercore believes half of Prime membership households will eventually shop for online medications on Amazon, which could result in $33 billion in additional revenue and $1.6 billion in operating income over the next three to five years.

"This inflection in consumer intent to purchase prescriptions online, and on Amazon, may well be a sign of Amazon closing in on a potential Rx market unlock," Mahaney wrote in the note.

Mahaney also wrote that Amazon was aggressively expanding its same-day-delivery service for pharmaceutical products, noting a recent announcement that said it would cover nearly half of US consumers by the end of 2025. He also highlighted the sheer size of the US prescription market, about $435 billion, of which Amazon Pharmacy has penetrated less than 1%.

Amazon's spokesperson declined to comment.

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• Bank of America downgraded AMD on Monday, citing higher competitive risk in the AI market.
• AWS customers' low demand for AMD AI chips and Nvidia dominance impact AMD's growth potential.
• AMD could still succeed due to Nvidia supply issues and its server chip market position.

Bank of America downgraded AMD after a Business Insider report raised concerns about demand for the tech company's AI chips.

Analysts at BofA cut AMD shares to a "neutral," citing "higher competitive risk" in the AI market, according to an analyst note published on Monday.

BofA analysts also lowered their AMD GPU sales forecast for next year to $8 billion, from $8.9 billion, implying a roughly 4% market share.

AMD's stock dropped roughly 5.6% on Monday, after falling about 2% on Friday. Its shares are down about 5% so far this year.

The declines follow BI's report on Friday that said Amazon Web Services was "not yet" seeing strong enough customer demand to deploy AMD's AI chips through its cloud platform.

Bank of America cited this AWS customer-demand issue, alongside Nvidia's dominance and the growing preference for custom chips from Marvell and Broadcom, as factors limiting AMD's growth potential.

"Recently largest cloud customer Amazon strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD," the Bank of America note said, referring to AWS's in-house AI chip Trainium and its close partnerships with Marvell and Nvidia.

AWS's spokesperson said in an email to BI, "AWS and AMD work together closely, as we continue to make AWS the best place to run AMD silicon. Based on the success of AMD CPUs on AWS, we are actively looking at offering AMD's AI chips."

An AMD spokesperson didn't respond to a request for comment on Monday.

AMD recently increased its GPU sales forecast, just a year after launching its line of AI chips. But its GPU market share is still far behind Nvidia's.

Bank of America said AMD could still succeed in the AI chip market, in part due to Nvidia's supply constraints and premium pricing, making it a strong alternative, especially for internal cloud workloads. It also said AMD is well positioned in the server chip market, as rival Intel continues to struggle.

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• AWS has not committed to offering cloud access to AMD's AI chips in part due to low customer demand.
• AWS said it was considering offering AMD's new AI chips last year.
• AMD recently increased the sales forecast for its AI chips.

Last year, Amazon Web Service said it was considering offering cloud access to AMD's latest AI chips.

18 months in, the cloud giant still hasn't made any public commitment to AMD's MI300 series.

One reason: low demand.

AWS is not seeing the type of huge customer demand that would lead to selling AMD's AI chips via its cloud service, according to Gadi Hutt, senior director for customer and product engineering at Amazon's chip unit, Annapurna Labs.

"We follow customer demand. If customers have strong indications that those are needed, then there's no reason not to deploy," Hutt told Business Insider at AWS's re:Invent conference this week.

AWS is "not yet" seeing that high demand for AMD's AI chips, he added.

AMD shares dropped roughly 2% after this story first ran.

AMD's line of AI chips has grown since its launch last year. The company recently increased its GPU sales forecast, citing robust demand. However, the chip company still is a long way behind market leader Nvidia.

AWS provides cloud access to other AI chips, such as Nvidia's GPUs. At re:Invent, AWS announced the launch of P6 servers, which come with Nvidia's latest Blackwell GPUs.

AWS and AMD are still close partners, according to Hutt. AWS offers cloud access to AMD's CPU server chips, and AMD's AI chip product line is "always under consideration," he added.

Hutt discussed other topics during the interview, including AWS's relationship with Nvidia, Anthropic, and Intel.

An AMD spokesperson declined to comment.

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Editor's note: This story was first published on December 6, 2024, and was updated later that day to reflect developments in AMD's stock price.

• AWS launched new AI chips that compete with Nvidia's GPUs.
• AWS says its goal is to provide more customer choice, not to dethrone Nvidia in the AI chip market.
• Gadi Hutt, a senior director at AWS, also talked about partnerships with Intel, Anthropic, and AMD.

Amazon Web Services launched an upgraded line of AI chips this week, putting the company squarely in competition with Nvidia.

Except AWS doesn't see it that way.

AWS's new AI chips aren't meant to go after Nvidia's lunch, said Gadi Hutt, a senior director of customer and product engineering at the company's chip-designing subsidiary, Annapurna Labs. The goal is to give customers a lower-cost option, as the market is big enough for multiple vendors, Hutt told Business Insider in an interview at AWS's re:Invent conference.

"It's not about unseating Nvidia," Hutt said, adding, "It's really about giving customers choices."

AWS has spent tens of billions of dollars on generative AI. This week the company unveiled its most advanced AI chip, called Trainium 2, which can cost roughly 40% less than Nvidia's GPUs, and a new supercomputer cluster using the chips, called Project Rainier. Earlier versions of AWS's AI chips had mixed results.

Hutt insists this isn't a competition but a joint effort to grow the overall size of the market. The customer profiles and AI workloads they target are also different. He added that Nvidia's GPUs would remain dominant for the foreseeable future.

In the interview, Hutt discussed AWS's partnership with Anthropic, which is set to be Project Rainer's first customer. The two companies have worked closely over the past year, and Amazon recently invested an additional $4 billion in the AI startup.

He also shared his thoughts on AWS's partnership with Intel, whose CEO, Pat Gelsinger, just retired. He said AWS would continue to work with the struggling chip giant because customer demand for Intel's server chips remained high.

Last year AWS said it was considering selling AMD's new AI chips. But Hutt said those chips still weren't available on AWS because customers hadn't shown strong demand.

This Q&A has been edited for clarity and length.

There have been a lot of headlines saying Amazon is out to get Nvidia with its new AI chips. Can you talk about that?

I usually look at these headlines, and I giggle a bit because, really, it's not about unseating Nvidia. Nvidia is a very important partner for us. It's really about giving customers choices.

We have a lot of work ahead of us to ensure that we continuously give more customers the ability to use these chips. And Nvidia is not going anywhere. They have a good solution and a solid road map. We just announced the P6 instances [AWS servers with Nvidia's latest Blackwell GPUs], so there's a continuous investment in the Nvidia product line as well. It's really to give customers options. Nothing more.

Nvidia is a great supplier of AWS, and our customers love Nvidia. I would not discount Nvidia in any way, shape, or form.

So you want to see Nvidia's use case increase on AWS?

If customers believe that's the way they need to go, then they'll do it. Of course, if it's good for customers, it's good for us.

The market is very big, so there's room for multiple vendors here. We're not forcing anybody to use those chips, but we're working very hard to ensure that our major tenets, which are high performance and lower cost, will materialize to benefit our customers.

Does it mean AWS is OK being in second place?

It's not a competition. There's no machine-learning award ceremony every year.

In the case of a customer like Anthropic, there's very clear scientific evidence that larger compute infrastructure allows you to build larger models with more data. And if you do that, you get higher accuracy and more performance.

Our ability to scale capacity to hundreds of thousands of Trainium 2 chips gives them the opportunity to innovate on something they couldn't have done before. They get a 5x boost in productivity.

Is being No. 1 important?

The market is big enough. No. 2 is a very good position to be in.

I'm not saying I'm No. 2 or No. 1, by the way. But it's really not something I'm even thinking about. We're so early in our journey here in machine learning in general, the industry in general, and also on the chips specifically, we're just heads down serving customers like Anthropic, Apple, and all the others.

We're not even doing competitive analysis with Nvidia. I'm not running benchmarks against Nvidia. I don't need to.

For example, there's MLPerf, an industry performance benchmark. Companies that participate in MLPerf have performance engineers working just to improve MLPerf numbers.

That's completely a distraction for us. We're not participating in that because we don't want to waste time on a benchmark that isn't customer-focused.

On the surface, it seems like helping companies grow on AWS isn't always beneficial for AWS's own products because you're competing with them.

We are the same company that is the best place Netflix is running on, and we also have Prime Video. It's part of our culture.

I will say that there are a lot of customers that are still on GPUs. A lot of customers love GPUs, and they have no intention to move to Trainium anytime soon. And that's fine, because, again, we're giving them the options and they decide what they want to do.

Do you see these AI tools becoming more commoditized in the future?

I really hope so.

When we started this in 2016, the problem was that there was no operating system for machine learning. So we really had to invent all the tools that go around these chips to make them work for our customers as seamlessly as possible.

If machine learning becomes commoditized on the software and hardware sides, it's a good thing for everybody. It means that it's easier to use those solutions. But running machine learning meaningfully is still an art.

What are some of the different types of workloads customers might want to run on GPUs versus Trainium?

GPUs are more of a general-purpose processor of machine learning. All the researchers and data scientists in the world know how to use Nvidia pretty well. If you invent something new, if you do that on GPU, then things will work.

If you invent something new on specialized chips, you'll have to either ensure compiler technology understands what you just built or create your own compute kernel for that workload. We're focused mainly on use cases where our customers tell us, "Hey, this is what we need." Usually the customers we get are the ones that are seeing increased costs as an issue and are trying to look for alternatives.

So the most advanced workloads are usually reserved for Nvidia chips?

Usually. If data-science folks need to continuously run experiments, they'll probably do that on a GPU cluster. When they know what they want to do, that's where they have more options. That's where Trainium really shines, because it gives high performance at a lower cost.

AWS CEO Matt Garman previously said the vast majority of workloads will continue to be on Nvidia.

It makes sense. We give value to customers who have a large spend and are trying to see how they can control the costs a bit better. When Matt says the majority of the workloads, it means medical imaging, speech recognition, weather forecasting, and all sorts of workloads that we're not really focused on right now because we have large customers who ask us to do bigger things. So that statement is 100% correct.

In a nutshell, we want to continue to be the best place for GPUs and, of course, Trainium when customers need it.

What has Anthropic done to help AWS in the AI space?

They have very strong opinions of what they need, and they come back to us and say, "Hey, can we add feature A to your future chip?" It's a dialogue. Some ideas they came up with weren't feasible to even implement in a piece of silicon. We actually implemented some ideas, and for others we came back with a better solution.

Because they're such experts in building foundation models, this really helps us home in on building chips that are really good at what they do.

We just announced Project Rainier together. This is someone who wants to use a lot of those chips as fast as possible. It's not an idea — we're actually building it.

Can you talk about Intel? AWS's Graviton chips are replacing a lot of Intel chips at AWS data centers.

I'll correct you here. Graviton is not replacing x86. It's not like we're yanking out x86 and putting Graviton in place. But again, following customer demand, more than 50% of our recent landings on CPUs were Graviton.

It means that the customer demand for Graviton is growing. But we're still selling a lot of x86 cores too for our customers, and we think we're the best place to do that. We're not competing with these companies, but we're treating them as good suppliers, and we have a lot of business to do together.

How important is Intel going forward?

They will for sure continue to be a great partner for AWS. There are a lot of use cases that run really well on Intel cores. We're still deploying them. There's no intention to stop. It's really following customer demand.

Is AWS still considering selling AMD's AI chips?

AMD is a great partner for AWS. We sell a lot of AMD CPUs to customers as instances.

The machine-learning product line is always under consideration. If customers strongly indicate that they need it, then there's no reason not to deploy it.

And you're not seeing that yet for AMD's AI chips?

Not yet.

How supportive are Amazon CEO Andy Jassy and Garman of the AI chip business?

They're very supportive. We meet them on a regular basis. There's a lot of focus across leadership in the company to make sure that the customers who need ML solutions get them.

There's also a lot of collaboration within the company with science and service teams that are building solutions on those chips. Other teams within Amazon, like Rufus, the AI assistant available to all Amazon customers, run entirely on Inferentia and Trainium chips.

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• Amazon is emphasizing customer choice over market dominance with its AI strategy.
• Amazon unveiled a new series of AI models called Nova this week.
• Amazon's Bedrock tool supports diverse models from multiple providers, unlike OpenAI.

Amazon believes AI models are not in a winner-take-all market.

The company drilled down on this message during this week's re:Invent, the annual extravaganza for its Amazon Web Services cloud unit. Even after unveiling a new series of homegrown AI models called Nova, which, by some measures, are as powerful as other market leaders, Amazon stressed the goal is to provide more choice to customers.

AI models have become the new battleground for tech supremacy since OpenAI released its popular ChatGPT service in late 2022. Companies have rushed to up the ante, trying to outperform each other in model performance.

Amazon has largely been absent from this race. Instead, it has tried to stay neutral, arguing that the generative AI market is so big and varied that customers will want more model choices that fit their different needs. Amazon still believes this is the right approach.

"There are some that would want you to believe there's just this one magic model that could do everything — we never believed in it," Vasi Philomin, AWS's VP of generative AI, told Business Insider. "There'll be many, many winners and there are really wonderful companies out there building some amazing models."

Different positioning

As part of this, Amazon has used Bedrock, an AI development tool that gives access to many models, as its main horse in the AI race. This approach differed from OpenAI, and Meta, which mostly focused on building powerful models or chatbots. Google has a leading AI model in Gemini, but also provides access to other models through its Vertex cloud service, and Microsoft has a similar offering.

This week, Amazon further leaned into its strategy, announcing an array of new updates for Bedrock, including a marketplace for more than 100 specialized models and a distillation feature that fine-tunes smaller, more cost-effective models. It also unveiled new reasoning and "multi-agent" collaboration features that help build better models.

Swami Sivasubramanian, AWS's VP of AI and data, told BI that AWS "pioneered" the model-choice approach and intends to continue to promote it as a "core construct" of the business.

"GenAI is a lot bigger than a single chatbot or a single model to reach its full potential," Sivasubramanian said.

More companies appear to be taking the multi-model approach. According to a recent report by Menlo Ventures, companies typically use 3 or more foundation models in their AI services, "routing to different models depending on the use case or results."

As a result, Anthropic, which Menlo Ventures has backed, doubled its share in the AI model market to 24% this year, while OpenAI's share dropped from 50% to 34% year-over-year, according to the report.

'Choice matters'

Amazon may have no choice but to stick to this narrative. When OpenAI captivated the world with ChatGPT a couple of years ago, Amazon was caught flat-footed, leading to an internal scramble to find answers, BI previously reported. Its first in-house model, called Titan, drew little attention.

Having its own advanced, powerful AI models could help Amazon. It might attract the largest AI developers and promote AWS as the leader in the AI space. It would potentially also encourage those developers to continue building within AWS's broader cloud ecosystem.

Amazon isn't giving up on building its own advanced models. Last year, it created a new artificial general intelligence team under the mandate to build the "most ambitious" large language models. On Tuesday, Amazon unveiled the early results of that effort with its Nova series, which includes a multimodal model capable of handling text, image, and video queries.

Still, Amazon's CEO Andy Jassy downplayed any notion of Nova going after competitors. He said he's been surprised by the diversity of models developers use and that Nova is just one of the many options they will have.

"There is never going to be one tool to rule the world," Jassy said during a keynote presentation this week.

It's hard to know how successful this approach is as Amazon doesn't break out its AI revenue. But Jassy was even more bullish on the AI opportunity during October's call with analysts. He said AWS was now on pace to generate "multi-billion dollars" in AI-related revenue this year, growing at "triple-digit percentages year over year." Amazon's AI business is "growing three times faster at its stage of evolution than AWS did itself," he added.

Rahul Parthak, VP of data and AI, go-to-market, at AWS told BI that Nova's launch was partly driven by customer demand. Customers have been asking for Amazon's own model because some prefer to deal with one vendor that can handle every aspect of the development process, he said.

Amazon still wants other models to thrive because its goal isn't about beating competitors but offering customers "the best options," Parthak added. He said more companies, like Microsoft and Google, are following suit, offering more model choices via their own cloud services.

"We've been pretty thoughtful and clear about what we think customers need, and I think that's playing out," Parthak said.

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• AWS recently laid out growth plans for 2025 in internal documents.
• One of the initiatives is focused on working more with consulting firms.
• Accenture was among several consulting firms mentioned by AWS.

Amazon Web Services wants to work more with consulting firms, including Accenture, part of a broader plan to spur growth in 2025, according to an internal planning document obtained by Business Insider.

AWS is looking to expand work with external partners that can sell its cloud services to hundreds of their existing customers. AWS sees an untapped market worth $250 billion and thousands of contracts up for renewal, the document explained.

Beyond Accenture, AWS mentioned Tata Consultancy, DXC Technology, and Atos as partners in the planning document.

AWS will prioritize these partners' existing customers and proactively reach out to them before contract-renewal time, and help the partners become "cloud-first," the document explained.

AWS pioneered cloud computing and still leads this huge and growing market. Over the years, the company has done a lot of work with customers through in-house cloud advisers. So the plan to expand its relationships with outside consulting firms is notable.

Ruba Borno is the VP leading the initiative, which will "review and prioritize partner's incumbent customers based on workloads and relationship," the document also stated.

Borno is a Cisco veteran who joined AWS a few years go to run its global channels and alliances operation, which works with more than 100,000 partners, including consulting firms and systems integrators and software vendors.

These plans are part of new AWS growth initiatives that include a focus on healthcare, business applications, generative AI, and the Middle East region, BI reported last week.

These are part of the AWS sales team's priorities for next year and Amazon refers to them internally as "AGIs," short for "AWS growth initiatives," one of the internal documents shows.

A spokesman for Tata Consultancy declined to comment. Spokespeople at Accenture did not respond to a request for comment.