Amazon is making its cloud business increasingly autonomous, reducing risk and dependence on semiconductor manufacturers. After developing its own processor chips for data centers, Amazon moved on to developing chips for powering networks.
Cloud company Amazon (AMZN) Web Services is the world’s largest cloud computing service provider looking to be independent of semiconductor manufacturers.
The Information said Tuesday that the Annapurna Labs team, acquired by Amazon in 2015, is working on chips to power its networks, which will help reduce AWS’s dependence on Broadcom (AVGO) supplies.
Broadcom had been supplying chips to Amazon in bulk for many years, which was advantageous compared to buying more expensive network chips from Cisco Systems (CSCO) and Juniper Networks (JNPR). However, according to media reports, the relationship between the company’s executives is strained and Amazon has long been considering alternative partners.
In 2019, to reduce its dependence on high-value Intel chips (INTC) for its data centers, AWS developed its own chip based on Arm Holdings technology. Read more in Marketinfo.pro article “Amazon Cloud Division Developed New Chip for Data Centers”.
On the back of the news, Broadcom shares fell 3.64% at the close of trading on Tuesday. Over the past 12 months, Broadcom shares are up nearly 105%.
Analysts assess Broadcom’s latest quarterly results positively and point to the advantageous position of chipmakers amid the global semiconductor shortage.
Amazon shares are down 6.2% since early 2021 to close slightly lower on Tuesday.
Although Amazon shares are still 55.6% higher than 12 months ago, they have been “traded in a corridor” for the past six months, and some analysts say that investors are no longer surprised by the company’s growth amid the COVID-19 pandemic and for the stocks to rise new meaningful incentive.
AWS’s main competitor is Microsoft (MSFT), which also uses Intel chips for its data centers, according to media reports, repeating Amazon’s experience and developing its own microprocessors for servers. Read more in the article “Microsoft is developing its own processors for its data centers and PCs.”