r/hardware • u/Winter_2017 • 2d ago
News Amazon seeks to offload $8 billion of Nvidia chips to investors, FT reports
https://www.reuters.com/business/retail-consumer/amazon-seeks-offload-8-billion-nvidia-chips-investors-ft-reports-2026-10-02/102
u/valarauca14 2d ago
For those out-of-the loop.
As of Jan 1 2025 they decided to make AI/ML hardware depreciate on a 5 year cycle cite. Meaning they plan to get about 5 years of useful life from that hardware before it has to be replaced. It really depends how the deal is structured but the surface read of this is Amazon is admitting GB300s (what the deal is concerning) will have to be replaced sooner then 5 years and they'll need a shell company/fall guy to absorb the write off/losses when this occurs.
Not exactly /r/hardware related, but some cracks are starting to show in the AI/ML hype cycle.
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u/Blacky-Noir 2d ago
Accounting depreciation and having to replace the goods is not the same thing.
But yeah, even at our current lower cycle, that's one of the main argument against the AI bubble. People like to compare it to railways and other expensive and in-the-red-for-years/decades of the past, except of course railways stay the same for decades or more, while computing very much not.
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u/ZombiePope 2d ago
If they actually believe they will get 5 years of useful life out of cutting edge LLM hardware, they're on something.
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u/HighestLevelRabbit 2d ago
Considering Google still has a decent amount of pascal based machines I'm sure the usable life of a GB3OO is longer than 5 years.
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u/ZombiePope 2d ago
Not if you're trying to be at all competitive with cutting edge hardware. We've seen significant performance per watt improvements every generation of hardware. If you're not upgrading, your competitors will be able to pack far more compute into their facilities for the same power usage, and run circles around you.
That hardware might be useful for more than a year or two for firms that aren't trying to be at the forefront of this, but for everywhere that is, its mostly a paperweight when the upgrade cycle hits.
Plus, ASIC hardware aimed at LLMs is likely going to hit the market within the next year based on standard design cycle lengths. This hardware is going to be valueless for cutting edge LLM work when that happens.
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u/HighestLevelRabbit 2d ago
Yes, they would definitely be upgrading. But in 4 years are data centres going to be bulk replacing all their GB300s? Or leaving them as they are very likely still profitable to run. Building new more datacentres for newer hardware, or replacing the mass amounts of racks full of much older hardware.
Keep in mind A100s are over 5 years old and still very very valuable. Datacentres still hold onto these.
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u/ZombiePope 2d ago
If they don't upgrade / expand with newer hardware, all of their customers that need / want the best hardware are going to move to their competition. This is going to make that hardware much less profitable while the power usage and running costs stay the same.
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u/is-this-a-nick 1d ago
The users will give zero shits about what card the models are running on as long as the performance is delivered as sold.
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u/HighestLevelRabbit 2d ago
They would definitely upgrade and expand. There is just more options available to do it than replacing existing hardware that is still very profitable to run.
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u/valarauca14 2d ago
I'm personally on the fence about this. Even if LLMs- went away tomorrow. GB300 are IO machines. 2x 800GB/s nics with the full ASCI protocol acceleration for everything for physical framing, tcp, ip, and TLS. Then the ARM core has no bottleneck for main memory is kind of crazy. That is, "serve all the networking needs of a moderate sized company" kind of networking bandwidth. So the resale value is "potentially there".
The problem is the non-standard rack & power options make it a nightmare to integrate.
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u/goldcakes 1d ago
It is a really fast server with lots of GPGPU acceleration and extreme amounts of networking/bandwidth at the end of the day. I think 5 years of reasonable use even for a frontier lab is gonna happen. There’s always a research ablation run you can do, or just do some RL rollouts over it.
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u/Express_Living2264 16h ago
according to jensen renting hardware pays for itself within a year.
Assuming thats roughly true i suspect amazon will demand a much lower price, or expects everything to burn down within a year.
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u/DependentOnIt 1d ago
How is this a crack? They aren't going to let them deprecate and never buy more.
They're proposing upgrading everything on a cycle. If anything this is a proven investment.
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u/Separate-Client-3213 1d ago
They are moving the books around, you will just no longer see the losses on amazon balance sheet, while they keep on purchasing new hardware every new year. If they don't someone else will.
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u/imaginary_num6er 2d ago
Couldn’t they just pull an Intel and change capital equipment depreciation from 5 years to 8 years, like they did in 2023 to make their books look better?
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u/valarauca14 2d ago
so that's the funny part, in Jan 1 2025 they went from 6 years to 5 years, lowering the number.
Amusingly later that year Baidu had to write down 2.5 billion from going to 3 years to 5 year depreciation cycle. Well, depreciation wasn't "technically" the reason but, "an audit of our infrastructure found it inadequate for out needs".
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u/R-ten-K 1d ago
You're mistaking an accounting estimate for an actual replacement schedule.
AMZN's 5 year depreciation change applies to a subset of server and networking equipment. It doesn't mean the HW must be replaced after 5 years, much less that GB300s specifically will become obsolete sooner. The SPV structure may raise a legitimate question about who bears the residual value risk, but calling it a "fall guy" requires you knowing the actual financing and lease terms. Which you don't.
This is about HW depreciation and technological obsolescence; neither is particularly new.
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u/Big_Lengthiness_4112 2d ago
The fall-guy part is what I'd watch. Nvidia is doing its own version of this: its latest 10-Q shows roughly $105B in guarantees tied to SB Energy and OpenAI build-outs. So if these chips really don't make it to 5 years, the write-down doesn't only land on the cloud providers. Some of it comes back to the seller.
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u/constantlymat 2d ago
It's not nothing but let's keep in mind Amazon's investment volume in 2025 was 131.8bn USD and in 2026 it is expected to rise to 200-220bn USD. Analysts believe AWS cloud infrastructure investment makes up 70-80% of the entire pie.
So these 8bn are just 2.85-3.44% of the investment volume.
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u/CuteSquirrel01 2d ago
As the consumer GPU bros say about Nvidia: It's over for consumer Amazon services, rip in peace Amazon.com and Amazon prime./s
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u/dropthemagic 2d ago
Interesting. This is a weird signal to give to the market on a Friday
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u/alienangel2 2d ago
It's not a weird signal for actual market-aware investors. They are just moving stuff around to make their balance sheets look better when these chips depreciate while still using and profiting off them (and probably more sophisticated shenanigans I haven't though of).
It is a weird risk against public perception though when I'm sure 90% of headline readers will go into the weekend thinking "Amazon is trying to sell off NVidia chips because they don't want them anymore, AI is doomed!"
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u/gamebrigada 2d ago
Amazon hates capx. This is no surprise. They barely own any of their own warehouses.
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u/w32stuxnet 1d ago
Various companies are trying to build asics designed specifically for LLMs. This will decimate demand for general purpose GPUs, hence why amazon are trying to find bag holders.
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u/Express_Living2264 16h ago
if any company produces a magical ai super chip, it's likely going to be nvidia.
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u/corruptboomerang 2d ago
What's that, tech bros are trying to start to insulate themselves from the risk of the AI bubble bursting... But also it's totally not going to burst.
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u/Winter_2017 2d ago
Amazon is changing their AI strategy - instead of owning their data centers, they are selling their chips to third parties and leasing them back. Such a move eliminates risk from their balance sheet.