DeepSeek Is Here: How Amazon Is Using It to Grow Its Artificial Intelligence (AI) Program

DeepSeek landed with a bang when the news came out that the China-based artificial intelligence (AI) application was able to produce similar results to OpenAI's ChatGPT and other generative AI applications at a fraction of the price. That threw the markets into brief chaos, and many AI stocks plunged and remain down. However, it didn't affect all AI stocks across the board; Amazon (NASDAQ: AMZN) stock, for example, was not impacted, although it fell after earnings. It's up 4% year to date.

Not one to let an opportunity pass it by, Amazon is leveraging the DeepSeek launch to its benefit, and it recently announced that it's incorporating DeepSeek into its AI platform. Let's go through why DeepSeek doesn't threaten Amazon and how Amazon can benefit from it.

DeepSeek works with Amazon AI

By now, most investors have heard about DeepSeek and some of its selling points -- specifically, that its performance matched U.S. companies like OpenAI's ChatGPT but at a much more affordable price -- up to 90% to 95% cheaper. It gets around using expensive training on large data by using a training mechanism called reinforcement learning, which doesn't need the same chip power as large data training.

While Nvidia stock tumbled on the news, since it makes the expensive graphics processing units (GPU) that drive training, most AI companies, including Nvidia, see the technology as a win for the overall advancement of AI in applications everywhere.

Amazon's AI business is focused on the output of models like DeepSeek, and it offers cloud-computing customers through Amazon Web Services (AWS) a list of foundation models to use in developing AI applications. The platform has many ways to use and produce AI products through developing customized large language models (LLM) as well as using preexisting LLMs. DeepSeek has already been integrated into the platform as an option for customers to use through both the Bedrock and SageMaker programs, both of which give users many tools to create semi-customized AI applications.

AWS clients pay according to the tools and programs they choose, and DeepSeek could be a more cost-effective option for use. Amazon still gains from customers choosing DeepSeek as a tool, since customers are paying for the program, which allows them to build full applications.

Amazon is investing in AI

Amazon stock fell after its fourth-quarter earnings report because its guidance was below what analysts are expecting for the 2025 first quarter.

Q4 itself was stellar. Revenue increased 10% year over year to $188 billion, and operating income increased from $13.2 billion to $21.2 billion. Net income almost doubled, from $10.6 billion to $20 billion. Those are massive profits.

What Amazon is spectacular at, among other things, is anticipating demand and innovating to meet it. That's how it's kept its edge over other companies for so many years. CEO Andy Jassy said in the Q4 earnings call that most of Amazon's more than $26 billion capital expenditures (CapEx) in Q1 went to AI and similar projects, and that there would be a similar run rate for the full year, or more than $100 billion. While that's going to eat into profits in the short term, management is positioning itself for the long-term opportunity.

It's also important because AWS is the largest cloud-computing company in the world, with more than a third of all global business according to Statista. To stay ahead, it needs to invest ahead. The next two largest cloud-computing companies are Microsoft, whose Azure has 20% of the market, and Alphabet, which has 12%. Each of those has big CapEx plans in 2025 as well -- $94 billion for Microsoft and $75 billion for Alphabet.

Jassy is doubling down on what he sees as an almost unprecedented opportunity for Amazon. He reiterated in the call that "AWS is expanding its CapEx, particularly in what is considered to be one of these once-in-a-lifetime type of business opportunities like AI represents."

Adding DeepSeek is just one of many ways Amazon is growing its AI business, and even though it's the talk of the media today, it could end up being a blip on the overall program. Because its business is so vast, with products like its own GPUs, as well as its many AI programs like Bedrock and SageMaker, it's less susceptible to dramatic changes in any one part. Amazon is looking toward the future, and although the stock only dipped a bit since the earnings report, it provides a more attractive entry point for the forward-thinking investor.