Bank of America analysts have termed this situation as 'AI's Sputnik moment,' highlighting the urgency for American firms to enhance their AI investments in response to DeepSeek's rapid growth.

Despite being relatively new to the generative AI space with the introduction of 'Amazon Nova' in December 2024, AWS is less exposed to competition from DeepSeek.

Jassy emphasized that the investment in AI will not only enhance AWS capabilities but also improve service delivery and cost efficiency across various applications.

In a bold move, Amazon has announced plans to invest over $100 billion in artificial intelligence (AI) throughout 2025, with CEO Andy Jassy indicating that recent capital expenditures of $26.3 billion are a 'reasonably representative' forecast for future spending.

Amazon Web Services (AWS) has reported a 19% increase in revenue, reaching $28.8 billion, benefiting from the ongoing AI boom and meeting market expectations.

Other tech giants are also ramping up their AI investments, with Alphabet planning $75 billion, Microsoft $80 billion, and Meta targeting $65 billion for the same year.

Despite a strong performance in the holiday quarter, Amazon's revenue forecast disappointed investors, leading to a 4% drop in stock price after-hours, although the stock has seen a nearly 9% gain year-to-date.

Jassy reassured investors about the long-term value of AI investments, describing it as a 'once-in-a-lifetime type of business opportunity,' despite mixed earnings results for Q4 2024.

The emergence of Chinese startup DeepSeek, which claims to have developed a competitive AI model for just $5.6 million, has intensified scrutiny and competition among major tech firms.

Jassy noted that the demand for AI resources has created capacity constraints for AWS, which may be exacerbated by hardware delays and insufficient electricity.

However, Jassy expects these supply constraints to ease in the latter half of 2025 due to improved chip deliveries and energy availability.

Amazon has also recently launched several AI products, including Nova models and intelligent shopping chatbots, and invested $4 billion in Anthropic, a startup founded by former OpenAI staff.