Amazon’s (NASDAQ:AMZN) shares have risen by 16.1% year-to-date, outperforming the Internet Commerce industry’s 11.1% return. The e-commerce giant’s success is largely driven by its cloud computing division, Amazon Web Services (AWS).

AWS’s momentum stems from its expanding clientele, bolstered by its advanced generative AI capabilities. A notable example is its recent partnership with SAP.

AWS and SAP Collaboration

AWS and SAP have partnered to accelerate the implementation of generative AI for various enterprises. SAP plans to integrate generative AI solutions into its ERP applications using AWS. Specifically, SAP will incorporate AI models from Amazon Bedrock, including the Anthropic Claude 3 model family and Amazon Titan, into its SAP AI Core to offer customers a variety of large language models (LLM) and foundation models (FM).

This partnership makes AWS the first cloud provider certified to support the SAP portfolio. SAP, which already uses AWS Graviton3 chips for SAP HANA Cloud, now aims to use AWS Trainium and AWS Inferentia chips for its future AI offerings. This extended collaboration enhances AWS’s client base.

Generative AI Capabilities: A Key Driver

According to Allied Market Research, the global generative AI market is projected to reach $191.8 billion by 2032, growing at a CAGR of 34.1% from 2023 to 2032. AWS’s growing generative AI initiatives position Amazon to capitalize on this significant market growth.

AWS benefits from the robust adoption of Amazon Bedrock, which provides seamless access to high-performing foundation models through an API. Additionally, AWS offers Amazon CodeWhisperer, a tool that delivers AI-powered code suggestions using an organization’s internal codebase.

AWS’s collaboration with NVIDIA to offer the Blackwell GPU platform will further accelerate inference workloads for complex language models, enhancing its generative AI capabilities.

Expanding Clientele and Growth

AWS’s generative AI advancements, along with its comprehensive cloud solutions, expanding data center network, and increasing number of AWS Regions and Availability Zones, are driving customer growth.

Recent partnerships include:

NinjaTech AI: Launching the next-gen AI agent Ninja, trained using AWS’s Trainium and Inferentia2 chips.

CrowdStrike: Using Amazon Bedrock and Amazon SageMaker to innovate in cloud security and AI.

Brightcove: Utilizing Amazon’s generative AI assistant, Amazon Q Business, for real-world use cases in enterprise and media sectors.

BlackBerry: Launching Cylance Assistant, a generative AI-backed cybersecurity advisor leveraging Amazon Bedrock.

AWS’s growing customer base is expected to drive its revenue growth. In Q1 2024, AWS generated $25.04 billion in revenue, accounting for 18% of total sales, and growing 17% year over year.

Competitive Position

AWS’s expanding clientele helps maintain its leading position in the global cloud market, competing with Microsoft and Alphabet’s Google.

According to Canalys, Amazon held 31% of the global cloud market in Q1 2024. Microsoft, with a 25% market share, reported $26.7 billion in Intelligent Cloud revenues, driven by Azure AI. Google Cloud held 10% of the market, reporting $9.6 billion in revenue, up 28.4% year over year.

Conclusion

Amazon’s success is propelled by AWS’s growing client base and strong partnerships. AWS’s global expansion and advancements in grocery, pharmacy, healthcare, and autonomous driving, coupled with its focus on generative AI, position Amazon favorably against cloud competitors like Microsoft Azure and Google Cloud.

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