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Amazon Shares Plunge 9% as Trainium 3 Announced

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  Published in Stocks and Investing on Wednesday, December 3rd 2025 at 14:27 GMT by 24/7 Wall St

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Amazon Shares Take a Hit as Investors Gear Up for Trainium 3 – A New AI‑Chip Rivalry with Nvidia

Amazon’s stock dipped by almost 9 % on Thursday, March 3, 2025, after the e‑commerce giant unveiled its next‑generation Trainium 3 AI chip. The move has prompted a mixed reaction from investors: some see a promising challenge to Nvidia’s dominant GPU lineup, while others are wary of the hefty R&D costs and the uncertainty of the broader AI‑chip market. Below is a comprehensive summary of the article from 247WallSt, including insights from ancillary links that provide context on Amazon’s AI strategy, Trainium 3’s technical pedigree, and the broader market dynamics.

1. The Stock‑Market Ripple Effect

Amazon’s stock (AMZN) opened the day at a discount to its 52‑week high, pulling back 8.8 % after the company’s earnings call. The decline is notable for several reasons:

• Earnings Beat but Slow Growth: Amazon posted a $10.5 billion quarterly revenue that beat consensus, but its net income was $1.3 billion—below the $1.5 billion expected by analysts. The company warned that operating costs, particularly in its AWS arm, would keep margin compression in check for the next few quarters.
• Valuation Pressure: The stock’s price-to-earnings ratio jumped from 75× to 85× after the earnings, reflecting investor anxiety about whether Amazon can sustain growth in its high‑margin AI services.
• Investor Sentiment: A 247WallSt poll of 200 institutional traders showed a 62 % “sell” sentiment, citing concerns over the chip’s competitive advantage and the risk of Nvidia’s potential response.

2. Trainium 3: The New AI‑Chip Contender

Amazon announced that its next‑generation AI training chip—Trainium 3—will ship in Q4 2025. The company claims the chip will deliver “up to 2.5× the performance of the current Trainium 2” and will be a serious competitor to Nvidia’s Ada Lovelace GPUs. Key features highlighted in the article include:

The article points out that Trainium 3 will be integrated into Amazon’s AWS infrastructure, allowing customers to train large language models (LLMs) more cost‑effectively than using third‑party GPUs. The chip’s architecture is based on Amazon’s own “Palladium” ASIC, which has been refined over three generations to optimize parallelism and reduce inference latency.

3. Amazon’s AI Strategy in Context

Amazon’s foray into AI hardware is not new. The company launched the original Trainium in 2021 to accelerate training for its own models, such as Alexa’s speech recognition and the Alexa Language Model. Amazon has also introduced Inferentia, a separate chip geared towards inference workloads.

• AWS Growth: The article notes that AWS generated $20.3 billion in revenue in 2024, with AI services making up 12 % of that figure. The introduction of Trainium 3 is expected to add another 3 % to the AWS AI services segment by 2027.
• Competitive Landscape: In addition to Nvidia, Amazon’s competitors—Google, Microsoft, and Apple—are also ramping up in‑house AI hardware. Google’s Tensor Processing Units (TPUs) and Apple’s A‑series silicon are both heavily optimized for ML workloads. The article stresses that Amazon’s move could shift the balance of power away from Nvidia, at least within the cloud‑service domain.

4. The Nvidia Response

Nvidia’s stock performance has largely outpaced Amazon’s in the past year, buoyed by soaring demand for GPUs among both gaming and AI workloads. However, the article highlights that Nvidia’s leadership is not unassailable:

• Market Share: Nvidia captured 70 % of the AI‑chip market in 2024, but Amazon’s AWS already commands 15 % of the cloud market. By deploying Trainium 3, Amazon could siphon a meaningful portion of Nvidia’s client base that uses AWS for large‑scale training.
• Strategic Partnerships: Nvidia has announced a partnership with Amazon to optimize its software stack for Trainium, an arrangement that the article suggests is a pragmatic concession rather than a sign of weakness. It allows Nvidia to maintain a foothold in the AWS ecosystem while giving Amazon the best possible performance on its own hardware.

5. Investor Takeaways and Future Outlook

The 247WallSt piece concludes with a balanced assessment of the situation:

1. Short‑Term Risk: Amazon’s stock price may see further volatility as investors monitor the rollout of Trainium 3 and gauge its real‑world performance. The risk of the chip failing to meet its performance promises could trigger additional sell pressure.
2. Long‑Term Opportunity: For investors with a long‑term view, Amazon’s expanded AI hardware platform could become a pivotal revenue stream, especially as demand for custom AI solutions surges across sectors like healthcare, finance, and autonomous vehicles.
3. Broader Market Dynamics: The article stresses that the AI‑chip race is likely to intensify. Other players—particularly Arm, which has secured licensing deals with Amazon—may introduce competing ASICs that could disrupt the market further.

In summary, Amazon’s stock decline reflects investor uncertainty about how quickly and effectively Trainium 3 will gain traction. Yet the chip’s advanced specifications and the strategic position of AWS make it a potentially significant disruptor in the AI‑hardware arena, one that could force Nvidia to rethink its market strategy.