Andy Jassy Just Made a Move That Should Excite Micron and Broadcom Investors
Key Points
Amazon, Micron, and Broadcom each play key roles in the booming business of AI.
Amazon sees a particular trend continuing until at least 2028.
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Amazon (NASDAQ: AMZN) may be most recognized for its e-commerce business -- after all, people worldwide turn to the platform to order everything from groceries and essentials to mass merchandise. And it's also become a key provider of entertainment, including books, movies, and access to important sporting events.
But an enormous source of growth for the company these days is actually from another business: its cloud computing arm, Amazon Web Services (AWS). This business, thanks to its position as the world's No. 1 cloud services provider and its investment in artificial intelligence (AI), has seen revenue explode higher in recent quarters. And the trend may not be over as AI is applied more frequently in the real world.
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All of this is great news for Amazon and its investors. But the positive news doesn't stop here, and instead, overflows into the cups of Micron Technology (NASDAQ: MU) and Broadcom (NASDAQ: AVGO). Amazon chief Andy Jassy just made a move that should excite investors in these tech giants.
Image source: Amazon.com Inc.
Amazon's position in AI
Before we dive in, it's important to understand Amazon's position in the AI market, a market marching toward trillions of dollars in value by early next decade, according to analysts' estimates. The company's AWS, as a cloud provider, offers the setting for AI development and use to take place. Developers and users of AI turn to AWS and other clouds to run AI workloads, and this has created high demand for capacity. AWS and other major clouds, also known as hyperscalers, have invested billions of dollars to build out capacity in order to serve this demand.
Where do Micron and Broadcom fit in? Micron is a key provider of the memory needed for AI to operate correctly -- and demand for various forms of memory is particularly high at this stage of the AI boom, as AI models, in the inference process, are thinking through problems and developing solutions. Memory demand has surged, resulting in tight supply, and memory prices are climbing. This has supercharged Micron's revenue growth and stock performance, but the company faces the challenge of ensuring a certain level of supply amid this intense demand.
Broadcom offers a wide range of leading networking products, including switches and routers, and it helps customers, including hyperscalers, build their own custom chips, nicely suited to specific tasks. These businesses have pushed Broadcom to tremendous growth in recent quarters, and the opportunity may be in its early stages -- as I noted earlier, the real-world use of AI should boost the need for necessary products and services, such as those of Broadcom.
A look at capital spending
Now, let's consider Amazon chief Andy Jassy's latest move -- and what it means for these AI giants. In Amazon's latest earnings call, Jassy announced that the company's capital spending for the year would rise to $220 billion, up from $200 billion, to address soaring demand.
"Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too," Jassy said.
This increased spending on AI infrastructure build-out, as well as the message regarding enormous demand, should translate into more revenue growth for Micron and Broadcom, providers of key products within data centers.
Jassy even added that demand Amazon is seeing for 2028 is "striking," more evidence that this isn't just a short-term trend but an ongoing movement that may reshape the revenue landscape for companies such as Amazon, Micron, and Broadcom.
In recent times, investors have worried about one particular risk concerning AI: that the future revenue opportunity may fall short, considering today's high levels of spending on infrastructure. But the evidence we're seeing so far, including this latest move by Andy Jassy, suggests just the opposite: This investment is needed just to keep up with demand. And if this continues, there could be many bright days ahead for Micron and Broadcom -- and their shareholders.
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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Broadcom, and Micron Technology. The Motley Fool has a disclosure policy.
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