Power Supply Not Yet Ready as Amazon Builds Nvidia Chip Stockpile

Billions of dollars are going towards Nvidia graphics processing units that Amazon’s data centres do not yet have sufficient power to operate, as the company fundamentally reshapes how it procures hardware.

Through a new early rack acceptance programme, approximately $5 billion worth of Nvidia GB300 server racks are due to reach the cloud computing giant’s United States facilities ahead of time. Further hardware deliveries worth roughly $3 billion each month are planned for the foreseeable future.

Severe electricity grid capacity constraints are driving hyperscale cloud providers towards unconventional ways of securing scarce AI chips, with Amazon’s substantial stockpiling offering a case in point. Fully assembled equipment is being kept temporarily in staging warehouses operated by financial intermediaries because several Amazon Web Services sites have insufficient power capacity to run the servers. The resulting idle hardware has, in some cases, been dubbed “dark GPUs.”

For the world’s largest cloud service provider, the financial implications of this procurement change are considerable. Ownership of server racks and recognition of the associated costs previously passed to Amazon only when the equipment arrived at operational data centres. Earlier acceptance of deliveries instead ties up substantial capital before the equipment generates any cloud rental revenue, creating immediate pressure on liquidity.

Unprecedented demands on Amazon’s financial resources from its extensive AI infrastructure build-out underpin this capital-intensive strategy. Capital expenditure is expected by the company to total approximately $220 billion this year, more than its major technology peers. Last quarter, that spending also left free cash flow negative for the first time since 2023.

Keeping competitors from securing the hardware first is a strategic trade-off that Amazon still considers necessary when taking inventory early, notwithstanding growing cash flow pressures and tighter credit market conditions for data centre financing.

Market Commentary: Amazon Defends Equipment Stockpiling

Amazon says stockpiling follows standard business best practice: once power capacity is available, the equipment should be ready for rapid installation and deployment. Internal claims that the timetable for bringing the facilities online remains uncertain have also been denied by the company.