Amazon Web Services (AWS) has announced a significant five-year partnership with AI-focused startup Databricks, as part of its strategy to boost its presence in the artificial intelligence sector. Under the deal, Databricks will utilize AWS’s custom AI chips to power its model training, aiming to offer a more affordable alternative to NVIDIA’s hardware, which has dominated the market.

Databricks, which acquired Mosaic ML for $1.3 billion, will use AWS’s chips to help companies build and customize their AI models. While AWS’s chips are not as powerful as NVIDIA’s, they come at a lower cost, with AWS claiming a 40% price reduction compared to other hardware options. Dan Ives, a tech analyst, noted that AWS’s chips still need strong partnerships to gain traction.

This deal is seen as a critical step for AWS in its race to compete with AI giants like Google and Microsoft. AWS has already secured partnerships with companies like SAP and Anthropic, further positioning itself as a key player in the AI infrastructure landscape. The collaboration with Databricks is viewed as a significant validation of AWS’s AI chip capabilities.