How AWS Chooses Its Chips

Imagine walking into a chip store. Not the salty, crispy kind that pairs well with your Friday night Netflix binge, but the kind that powers the digital world—the chips in your servers, phones, and, if you're Amazon Web Services (AWS), the ones that keep your data centers humming like a perfectly tuned orchestra.

Now, if AWS were buying potato chips, they'd be the sort of discerning customer who reads every label, asks the farmer about the soil quality, and then asks if they can co-develop a new potato species. Because in AWS's world, choosing a chip isn't just about buying something that exists—it's about co-creating the future.

This post will dive into AWS's strategic dance with chip manufacturers. We'll look at how they procure, collaborate, and even acquire—all while keeping power consumption low and performance high. Ready to dive into this journey of silicon and synergy?

1. The Procurement Process—Or, How AWS Chooses the Perfect Chip

When AWS goes shopping for chips, it’s not about who has the shiniest model. It’s about performance, compatibility, power consumption, and reliability. Imagine you're building a dream team, and every member has to pull their weight across multiple parameters. For AWS, these parameters are clock speed, thermal design power, and of course, price. Each chip must prove itself worthy—like a Gladiator in the Colosseum, but with more data and fewer lions.

When AWS procures a chip, it’s akin to selecting players for an all-star team—each choice is based on rigorous evaluations of performance, compatibility, power consumption, and cost-effectiveness. Investors would be particularly interested in how these decisions impact AWS’s financial performance and competitive advantage.

When AWS goes shopping for chips, the decision-making extends beyond the typical considerations of clock speed and power consumption. For AWS, each chip must meet rigorous standards for performance, compatibility with existing infrastructure, power efficiency, and cost-effectiveness. Investors would be especially interested in understanding how these procurement choices impact AWS’s cost savings, scalability, and competitive positioning.

Here is the layered analysis:

• First Layer: Performance. Can it handle the workloads AWS plans to throw at it? LLMs, databases, streaming—each workload is different, and the chip needs to be a chameleon.

• Second Layer: Compatibility. AWS’s data centers are full of existing hardware, and a new chip needs to fit in—like a perfect Tetris piece.

• Third Layer: Power Consumption. AWS’s environmental mandates mean every joule counts.

2. Collaboration with OEMs—Building Better Chips, Together

Chips don’t just fall from the sky—they're built, iterated upon, and perfected in labs. AWS doesn’t just wait for the next release; they work directly with manufacturers like NVIDIA and Intel. In some cases, they’re even the first to test new releases in their labs—think of it as getting an early beta of a blockbuster game before anyone else can.

AWS’s role isn’t passive. They’re like co-producers of a movie, suggesting edits, re-writes, and reshoots. They help chip manufacturers tailor their designs to AWS-specific needs.

AWS doesn’t just purchase off-the-shelf chips; they collaborate closely with OEMs to co-engineer custom solutions, optimizing chips to align with their unique infrastructure needs. In technical partnerships with NVIDIA and Intel, AWS often becomes an early tester, running beta versions through their labs to ensure they meet both performance and efficiency benchmarks.

In AWS’s partnerships with chip manufacturers like NVIDIA and Intel, they move beyond simple purchasing to co-develop and test new technologies. Through these collaborations, AWS can tailor chips to meet their specific infrastructure needs, often optimizing for AI use cases and data throughput. This symbiotic relationship strengthens AWS’s market positioning by ensuring they stay ahead in both technological innovation and operational efficiency.

Layered Analysis:

• First Layer: Co-Engineering. AWS collaborates to align chip designs with their specific requirements.

• Second Layer: Testing. Chips are put through AWS Labs, with workloads designed to break their spirit—only the tough ones make it.

• Third Layer: Customization. AWS often needs unique features; chips must be ready to pivot, adjust, and comply.

3. Acquisition Factors—When the Best Chips Are Bought, Not Made

AWS sometimes buys the whole chip shop. They acquire startups and early-stage companies if they see the potential for something great—like an undiscovered band ready to hit the big time. But an acquisition is not just about buying tech; it’s also about acquiring talent. The engineers behind these startups are like virtuoso musicians, and AWS is ready to add them to their orchestra.

In some cases, AWS chooses to acquire early-stage chip companies outright. AWS seeks companies that bring unique technology and IP, alongside engineering talent that can integrate seamlessly with AWS’s in-house teams. By acquiring startups, AWS aims to bypass developmental hurdles, fast-tracking innovation while avoiding dependency on external suppliers.

AWS frequently evaluates startups for acquisition when it identifies companies with unique IP and strong engineering teams capable of fast-tracking innovation. These acquisitions aren’t only about technology; they’re also about talent acquisition and cultural fit. By acquiring early-stage companies, AWS gains an edge in IP ownership and accelerates development timelines, reducing dependency on external vendors.

Layered Analysis:

• First Layer: IP and Engineering Talent. AWS wants not just the technology but the brilliant minds behind it.

• Second Layer: Valuation. Acquisition isn’t random; it’s a calculated decision based on engineering potential and acceleration opportunities.

• Third Layer: Pilot to Production. The leap from having a pilot chip to scaling production is massive. AWS is interested in the startups that can make that leap—or that need AWS’s help to do so.

4. Power Consumption and ESG Goals—Why Efficiency Matters

AWS is committed to reducing power consumption—not just for cost savings, but for meeting environmental and sustainability goals. A chip that promises a 90% reduction in power consumption can be as exciting as discovering a secret level in a video game. Lower power means lower heat, fewer cooling needs, and, ultimately, a better environmental footprint.

AWS’s commitment to environmental, social, and governance (ESG) goals shapes its chip selection criteria. Power consumption isn’t only a cost factor; it’s also central to AWS’s sustainability strategy. Chips optimized for low power usage enable AWS to minimize cooling demands and lower the overall carbon footprint of their data centers.

Layered Analysis:

• First Layer: Efficiency. It’s about getting the most out of every watt.

• Second Layer: Heat Management. Less power means less cooling, which means fewer resources spent.

• Third Layer: ESG Mandates. Power efficiency isn’t just nice to have; it’s part of AWS’s broader goals for environmental sustainability.

5. The Future of Chips at AWS—Innovation as a Way of Life

The chip market isn’t slowing down, and neither is AWS. They are constantly on the lookout for startups with innovative designs that might give them an edge—whether that’s in AI use cases, better streaming performance, or simply running existing workloads with less power. The future for AWS involves risks, pilots, acquisitions, and a relentless pursuit of better, faster, and greener chips.

Looking ahead, AWS is always on the hunt for promising startups with disruptive chip technology. Whether it’s enhancing AI performance or improving data streaming, AWS’s future chip landscape is geared towards supporting workload diversity with maximum power efficiency and performance.

AWS is constantly scouting for disruptive startups that could enhance AI capabilities, data streaming, and general efficiency. This forward-looking approach positions AWS as a leader, not just in cloud services but in custom silicon innovation. The balance of risk and reward in these investments highlights AWS’s commitment to pushing the boundaries of tech.

Layered Analysis:

• First Layer: Risk vs. Reward. AWS is willing to bet on new tech, but they do their homework.

• Second Layer: Collaboration. They don’t do it alone; they partner with the best minds in the industry.

• Third Layer: Long-Term Vision. It’s not about solving today’s problems, but about building the foundation for tomorrow’s possibilities.

AWS's approach to chips is like conducting a symphony. Each part—procurement, collaboration, acquisition, and sustainability—is a distinct section of a grand musical score, each playing its role to perfection. By working closely with manufacturers, collaborating in co-engineering, and buying out the most promising startups, AWS ensures that the chips in their data centers are always top-notch, always evolving.

And at the end of the day, these chips aren’t just keeping servers running; they’re creating possibilities. They’re helping AWS support massive machine learning models, provide more efficient cloud services, and even save the planet—one watt at a time.

And that’s the magic behind AWS’s chip choices. If you ever thought picking a chip was like picking a chocolate bar off the shelf, think again. It’s more like growing the cocoa, collaborating with chocolatiers, and then baking the perfect cake—one that fuels the world’s largest digital infrastructure.