AWS partners with European chipmaker for data center chips

Amazon Web Services (AWS) is expanding its partnership with French-Italian chipmaker STMicroelectronics to secure semiconductor supplies for its data centers, according to Bloomberg.

STMicro will provide chips for high-bandwidth connectivity and energy-efficient power management, essential for hyperscale operations.

AWS received warrants to purchase up to 24.8 million STMicro shares, vesting over time based on product payments, with an initial exercise price of US$28.38.

The warrants can be exercised within seven years.

STMicro shares rose 6.5% to US$26.51 following the announcement.

The growth of data centers supporting AI technologies has increased demand for advanced chips from companies like Nvidia, AMD, and TSMC, as well as for mature analog chips used in power management and sensors.

STMicro, a supplier for Tesla and Apple, recently reported quarterly revenue that exceeded analyst estimates, though its shares declined due to uneven recovery across markets, with the automotive sector remaining unstable.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

This is a multi-year, multi-billion-dollar chip supply and cloud collaboration

The agreement runs for multiple years and totals multiple billions of US dollars. It makes STMicroelectronics a strategic supplier for Amazon Web Services’ (AWS) data center compute infrastructure 1.
The scope includes chips for high-bandwidth connectivity, plus analog and power integrated circuits (ICs) used for energy-efficient power management in hyperscale operations 1.
STMicroelectronics also described work on silicon photonics (using light to move data inside and between chips) and BiCMOS (a chipmaking process that combines bipolar and CMOS transistors). The effort targets 800Gb/s and 1.6Tb/s optical interconnects for AI data centers 2.
STMicroelectronics will also use AWS’s scalable cloud compute for its electronic design automation (EDA) workloads (software used to design chips). The goal is faster silicon design and quicker product releases 1.

The AI arms race extends to power and connectivity components

The push to lock in advanced Nvidia GPUs can distract from limits in the power-delivery and data-transfer parts needed to run AI at scale 3.
Rack power density keeps climbing. The Uptime Institute’s 2024 survey cited an average around 8 kW, while some sites run above 50 kW to 100 kW. Hyperscalers like AWS want steadier supply of power-management chips and connectivity parts 3.
The structure includes warrants. STMicroelectronics issued AWS warrants for up to 24.8 million ordinary shares, vesting in tranches tied to payments for ST products and services bought by AWS and its affiliates. The initial exercise price is $28.38, with a seven-year exercise window from the issue date 1.
This approach links purchase commitments with equity incentives. Similar setups could spread as demand for specialized data center hardware rises 1.