AI wars: Amazon is coming for Microsoft and Google

Amazon’s (AMZN) AWS re:Invent developer conference kicked off with a slew of announcements this week. The early takeaway? Amazon is working feverishly to catch up to AI standout, and chief rival, Microsoft.

Re:Invent is Amazon’s annual showcase for its all-important Amazon Web Services business. This year, the company kicked things off with a massive focus on generative AI, as it seeks to battle back against Microsoft (MSFT) and Google’s (GOOG, GOOGL) early market dominance.

The biggest announcements from the show include Amazon’s new Q chatbot, an upgraded AI chip, and deeper partnership with powerhouse chipmaker Nvidia (NVDA). Each of those should help Amazon, and its AWS business, catch up with the industry leaders.

“Our discussions indicate AWS has made solid progress building out its [generative] AI strategy and capabilities, with focus on providing an expansive selection of customizable FMs in a secure environment,” JPMorgan analyst Doug Anmuth wrote in a research note.

He added: “We come away confident that AWS is starting to close some of the very early gap in generative AI, with silicon development, breadth of [large language models], and significant customer data already shifted into the AWS cloud all key differentiators over time.”

But Amazon’s moves don’t mean it’s on a par with Microsoft or Google, at least just yet.

Amazon’s Q is coming

The hottest news out of re:Invent was Amazon’s Q chatbot. Designed for enterprise customers, rather than the general public, Q is meant to serve as a kind of general assistant to help users do things like draft emails, come up with business ideas, summarize reports, and plan workshops.

Amazon is touting the fact that Q was trained on 17 years of AWS data as a key differentiator for the platform, which is currently available in preview. In one example, Amazon explains how you can use Q to take information from a corporate blog and turn it into a social media post complete with hashtags. In another example, the company explains how you can use Q to create helpful apps for workers.

The service is similar to what Microsoft and Google currently offer across their generative AI platforms. Microsoft’s Copilot and Azure AI studio help workers summarize content and craft emails, as well as create custom AI copilots. Copilots are essentially AI-powered apps.

Google’s Duet for Workspaces, meanwhile, acts as an generative AI helper for brainstorming and summarizing content, while its Vertex AI services helps enterprise customers build generative AI apps.

The upshot here is that Amazon’s Q puts the company on a path to more directly compete with both Microsoft and Google, which rank No. 2 and 3 in the cloud market behind Amazon.

Amazon’s silicon moves

In addition to Q, Amazon also took the wraps off of its latest AI chip: the Trainium2. Designed to train AI models, Amazon says Trainium2 chips will offer training four times faster than the first-generation Trainium and two times as energy efficient.

Importantly, AI developer Anthropic, the company behind the Claude chatbot, says it will develop future foundation models on Amazon’s Trainium2 chips. In September, Amazon announced that it will invest up to $4 billion in the startup.

Amazon has been developing and using its own AI chips for the past few years, giving it a head start on Microsoft, which only recently announced that it’s working on custom AI chips. What’s more, despite investing more in its own silicon, Amazon is deepening its relationship with AI chip leader Nvidia.

During re:Invest, Nvidia CEO Jensen Huang took to the stage to tout Amazon’s commitment to Nvidia’s chips, and announce that the company would be getting access to Nvidia’s latest hardware.

Amazon’s generative AI push comes as the company continues to contend with slowing AWS revenue growth, which has raised alarms on Wall Street. In Q3, the company reported $23.06 billion in net AWS sales. Analysts were expecting $23.13 billion.

Microsoft and Google made 2023 their year to shine as AI stalwarts, giving their cloud businesses some added oomph. But with Amazon’s latest moves, the company is going into 2024 ready to do battle.

Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.

Click here for the latest technology news that will impact the stock market.

Read the latest financial and business news from Yahoo Finance