Is Amazon the Most Underrated Chip Stock on the Market?

Core Insights - Amazon's custom chips have reached a $10 billion annual revenue run rate with triple-digit year-over-year growth, indicating significant momentum in its chip business [1] - The adoption of Graviton 5 among the top 1,000 AWS customers exceeds 90%, showcasing the strong demand for Amazon's advanced CPU for cloud workloads [1] - Amazon's chip revenue is approximately 60% of AMD's data center sales and is growing at a rate three times faster, highlighting its potential in the semiconductor market [1] AWS Chip Operations - Amazon's chips business is gaining significant traction, with Trainium and Graviton achieving a combined annual revenue run rate exceeding $10 billion [1] - AWS segment sales rose 24% to $35.6 billion in Q4 and 20% to $128.7 billion for the full year [1] - Trainium 2 is fully subscribed with 1.4 million chips deployed, supporting major AI workloads and projects [1] Competitive Landscape - Amazon's chip revenue, while only 1.4% of its total projected $716.9 billion in 2025 net sales, is on a trajectory to potentially rival AMD's data center revenue [1] - AMD's data center revenue reached $16.6 billion, a 32% increase from the previous year, but Amazon's captive demand from its ecosystem provides a competitive edge [1] - Amazon's in-house chips enhance margins directly, contrasting with AMD's need to compete for each new data center contract [1] Investment Considerations - Amazon is positioned as an underrated player in the semiconductor sector, with its custom silicon driving AWS expansion [1] - While AMD remains a strong semiconductor stock, investors should consider Amazon for its growth potential in the chip market [1]