How is this going to really well excite your customer base? What are you most excited for?
Well, you know, we've had Alexa around for ten years. We have 600 million devices in customers' homes and offices. Alexa Plus is our next generation Alexa personal assistant, and she's meaningfully smarter, more capable, and more useful than her prior self. You can do all the things that you used to do, but every single one of those functions is better. I can give you just an example. There are so many examples, but if you have smart home controls with Alexa, now you can say, 'Alexa, I have guests coming over at 7 PM. Could you raise the drapes? Could you raise the temperature by five degrees? Turn on the porch lights, the driveway lights, and put on mellow dinner music.' You can do that all verbally and simply, using conversational language like that. You don't need an app; it just happens. And so Alexa Plus, with what we've just announced and what we're launching, really is the first one that not only is highly intelligent to answer various questions, but she can do so many things for you—play music, play video, control your smart home, make reservations, hire people to fix your oven. It really is the first big, large-scale practical use of generative AI by consumers that they're going to be able to see and use.
Naturally, I can see how you're going to obsess over it, whether it's ordering the latest buffalo wings in New York and seeing where the best place is to do that. But how are your stakeholders and shareholder base going to obsess about this, about generative AI in Alexa Plus? How is that adding value for them?
Well, I think if you think about what Alexa allows customers to do, it makes shopping easier because it's so much more intuitive to buy products. It makes enjoying music easier, enjoying video and streaming media better. It allows you to control your smart home in a different way. So every single one of our consumer customer experiences gets better with Alexa Plus. And then, of course, Alexa has its own business model. We have a brand new lineup of devices coming in the fall that are beautiful. I think people are going to really like them. We have opportunities for new products and advertising in various interfaces like our mobile and desktop interfaces coming in Alexa. And then we have subscriptions. So I think there's a sustainable business model there as well.
Talk to me about subscriptions because you're getting it free if you've got Prime. I get a lot with Prime now. Are you able to increase the prices that you think of Prime?
Prime is an incredible value. If you think about getting free shipping on 300 million plus items, we launched Prime with free shipping on about a million items. Today, it's 300 million items, and most of the time you're getting your products now inside of a day. So between that and what you get with Prime Video, Prime Music, the grocery subscription, and our unique selling events, Prime is an incredible value. Adding Alexa Plus on top of that is just great value. So we don't have any plan right now, but I do think Prime is unusual value, and it's why people use it so expansively.
To increase that use has been this invention, this innovation of generative AI, and that costs money. And you've actually just took to the stage yesterday to say out of all companies, you are spending the most on AI. How much are you spending on it?
Well, we don't disclose the exact amount, but we're spending a pretty significant amount of CapEx, and the lion's share of it is on generative AI. We've said in our business, even though generative AI for us is a many billion dollar a year business and growing triple digit percentages year over year, that if we had even more capacity, we could use it to monetize it. And we have this very interesting and fortunate flywheel in AI inside of Amazon: if your mission is to make customers' lives easier and better every day, and if you believe that all the customer experiences we know of today are going to be reinvented through generative AI, you're going to be building a lot of generative AI apps. By the way, other companies are too, on top of it. If you ask which is the leading technology infrastructure platform, if there are a lot of generative AI apps being built on top of you, you can't help but get a lot of feedback from people on how they want those building blocks to be better. And if you're willing to invest in those building blocks, which we are, with our own chip Trainium, our own frontier model Amazon Nova, and model building services like SageMaker and Bedrock, and you're getting a lot of feedback, they get better much more quickly, which makes it easier and quicker for people to build generative AI applications, meaning you get more running on the platform. That flywheel is very unique for Amazon.
The lion's share, though, you did say basically $100 billion run rate for CapEx expenditure. Can you give us even like a percentage breakdown of how much that goes to distribution, logistics, and how much goes to AI?
Most of it, the lion's share, is more than 50%.
We're playing the warmer and colder game!
Yes, exactly. I love a game. But talk to us about that capacity that you talked about. AWS could grow even faster if you had all the chips you needed, all the power you needed, the motherboards you needed. How much faster could AWS grow?
It's hard to put an exact percentage, but I do think it could be growing faster. I'm confident it could be growing faster. For a long time, there still aren't as many chips as we all want. We're fortunate in that we're very big partners with NVIDIA, but we also have our own custom silicon, Trainium, which we just released and it's 30 to 40% more price performance than the CPU power instances, which is a big deal at scale if you're doing generative AI and on the inference side. So we have maybe more chips than some others might have access to, but we still don't have enough. And there's just not enough power in the world right now, and we're all working really hard on that. I expect that to relieve some in the second half of this year. But right now, we have insatiable demand.
We had amazing demand coming from Jensen Huang, who had his numbers out yesterday at Nvidia. Was there a limitation on the Nvidia chips in particular that pulled back capacity? And at what point do you think you can depend even more on your own in-house built chips to offset any of that?
Well, there's a lot of demand for generative AI right now. People are very excited about it. I think all the different providers of chips have been constrained to some extent. Some of the new generations maybe have gone through different evolutions, and when they're going to be released maybe a little later than people thought. There are some components like motherboards that we all use that are in shorter supply than others. So there are some supply chain issues which I expect to get better. People are very excited about Trainium, and we have gone back at least a couple of occasions to make more Trainium than we had intended because we have so much demand. So I expect we'll have customers for as long as I can foresee wanting to run compute on instances with NVIDIA chips, but I think a lot of the demand will also be served by Trainium.
Is it that you just had to pull it back from everyone a little bit more generally, or who lost out here, do you think?
It's always a combination. There are people that just have a very small amount of accelerators they need; they don't usually have a problem with something called capacity blocks, which is kind of like an on-demand way to use accelerators and generative AI chips, and that continues to grow. It's really the folks who have an idea for a new application but need a lot of chips. If we don't have the capacity, we have to give them what we can and push our partners to get it in sooner, and they can't get their initiatives done as quickly as they want because the capacity isn't there.
Anthropic said all capacity it needs. You place relationships?
We have a very close partnership with Anthropic. We have this project called Project Rainier with them. They're building their next version of their frontier model on top of Trainium and our customized silicon. They're going to use over 400,000 Trainium chips. So yes, they have capacity; they're ramping up, and we're excited about that partnership.
You mentioned the power side. How much is that something you're talking to the administration about? How much is the administration supportive of the buildout that you need to do?
We have been talking to administrations, multiple administrations in this country over the years, as well as in other countries. The power shortage really snuck up on people right after the pandemic. The current administration is very receptive to it; they understand the constraints it's having on the economy and are convicted about solving it.
One of the restrictions around chips. Microsoft just called on the administration today to say this limitation on chip access for some of our close allies around the world is going to limit all global business. You are a global business. Is it something you're worried about?
I think we share the concern. I'm going to be curious to see where the AI diffusion act goes. It was enacted pretty quickly at the very end of the last administration. I don't know how this administration feels about it, but it has limitations on certain countries who are natural allies of the US. For their companies to be able to get done what they want on top of technology infrastructure platforms like ours, they're going to need more chips. If we don't do it, we're going to basically give up that business and those relationships to other countries who can provide those chips. I think we're better off being partners with them.
