Amazon is reportedly revisiting the smartphone market with a new device powered by artificial intelligence. Over a decade after the Fire Phone faced commercial challenges, the e-commerce and cloud giant is working on a smartphone internally codenamed "Transformer." This development raises questions for investors regarding its potential impact on AMZN stock.
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According to sources cited by Reuters, the new smartphone will be part of Amazon's Devices division, specifically from a newer unit called ZeroOne. It is expected to come pre-installed with Amazon apps such as Amazon Shopping, Prime Video, and Prime Music, and will heavily utilize Alexa, Amazon’s smart home assistant. The updated version of Alexa, launched as Alexa+ in February 2026, incorporates generative AI capabilities that allow it to perform tasks like trip planning, making purchases, and answering complex inquiries.
Internally, the smartphone is viewed as a strategy to guide more users towards Amazon's expanding AI offerings. During Amazon's Q4 earnings call, CEO Andy Jassy announced plans for approximately $200 billion in capital expenditures, with a significant focus on Amazon Web Services (AWS). AWS experienced 24% year-over-year growth in Q4, marking its fastest growth in 13 quarters, achieving an annualized revenue run rate of $142 billion. Additionally, customer expenditure on Amazon Bedrock, its AI model platform, surged by 60% within a single quarter.
Amazon's custom AI chip segment, which includes Graviton and Trainium, has surpassed a $10 billion annualized revenue run rate. The latest AI chip, Trainium2, boasts a price efficiency that is 30% to 40% better than comparable graphics processing units, with over 100,000 companies currently utilizing it. Furthermore, AWS holds a revenue backlog of $244 billion, representing a 40% increase year-over-year. The company is positioning itself for a future where AI plays a critical role in every aspect of its business, making the smartphone a logical extension of this strategy.