In more good news for Amazon, Snowflake signs $6B deal with AWS for AI CPU chips

The Snowflake cloud storage giant has signed a new five-year, $6 billion deal with Amazon Web Services, the companies announced Wednesday.

Snowflake has always run on AWS, although apparently, these days, it’s available on Microsoft Azure and Google Cloud. Compared to how big this contract is for these companies, Snowflake has sold about $7 billion worth of its services on the AWS Marketplace since it was founded in 2012, AWS said. So this new contract is close to all the money that has ever gone into that cloud.

It can do that because Snowflake’s customers are accelerating their spending on AWS over time, Snowflake says, doubling by 2025 to $2 billion in that calendar year alone.

What’s driving growth is, naturally, AI. Snowflake has been offering its AI building tool, Cortex AI, for a few years now. It’s a logical tool: Snowflake is where most of the business data resides. An AI tool can provide features such as a text interface for database queries (just ask, in plain language), summary reports, and so on.

Notably, Snowflake is signing this contract to gain additional access to AWS’s home-based ARM CPU chip, Graviton.

As AI moves from training to everyday use to automated agents, CPU usage goes up. While GPUs handle training and reasoning, CPUs handle most of the other AI-related tasks, especially agents.

Amazon CEO Andy Jassy last month boasted that Amazon’s homegrown AI chips offer “better price performance” than Nvidia’s offerings, even though AWS still uses Nvidia’s chips in its cloud. Demand is so high for AI processing that cloud providers like AWS are churning out chips at a rapid pace. In addition, all major AI model makers (and many other AI offerings) have built their own applications specific to Nvidia chips.

However, Amazon’s chips are the least expensive way for the cloud giant to be used. Amazon, a price-conscious company, says it passes those savings on to its customers.

Therefore, these chips attract new multi-billion dollar deals. Last month, for example, AWS signed an agreement to supply millions of Graviton chips to Meta for its growing AI computing needs. That was a big win for AWS because Meta had signed a $10 billion deal with Google Cloud a few months ago.

In addition, these agreements serve as a notice to Nvidia that competing CPUs from cloud giants are trying to come to lunch. Google has also been developing its own AI chips for years. Microsoft recently introduced its Maia AI chip in January.

It’s no surprise that Nvidia’s CEO, Jensen Huang, said last week that he is ready to protect, even expand, his position. A new AI-specific CPU introduced by his company, called Vera, represents a ‘brand new’ $200 billion market for Nvidia, he announced after delivering another record-breaking quarter last week.

While Nvidia may not be giving up market share to Amazon or any other cloud provider that easily, the multi-billion dollar AWS deals show how AI is raising its boat. Whichever companies benefit most from the rise of AI in our work and home lives, cloud providers are getting their share.