Amazon's Alexa voice assistant devices will use generative AI technology, but the cloud computing business AWS will prove to be the real battleground.
Amazon (AMZN) isn't getting out of the hardware business. In fact, Alexa seems to be gaining a little traction.

The tech giant held its annual fall device event on Wednesday. About 10 months ago, The Wall Street Journal reported that Amazon's hardware business was under scrutiny from top executives at companies looking to cut costs. Amazon subsequently laid off 26,000 workers, which reportedly dealt a heavy blow to the division. The division has amassed a broad portfolio ranging from successful products like the Kindle e-book reader and Echo smart speaker to more questionable attempts like flying home security drones, children's video phones and even a $1,600 home robot.

Still, the slimmed-down team has its hands full. On Wednesday, Amazon introduced at least 10 new devices, including the first speaker under the Amazon Fire TV brand and a new device category called Echo Hub, a wall-mounted smart home control panel. But the most notable development is the application of generative AI to voice assistant Alexa. Alexa has been an integral part of Amazon's offerings since its first smart speaker came out in 2014.

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Amazon (AMZN) isn't getting out of the hardware business. In fact, Alexa seems to be gaining a little traction.

The tech giant held its annual fall device event on Wednesday. About 10 months ago, The Wall Street Journal reported that Amazon's hardware business was under scrutiny from top executives at companies looking to cut costs. Amazon subsequently laid off 26,000 workers, which reportedly dealt a heavy blow to the division. The division has amassed a broad portfolio ranging from successful products like the Kindle e-book reader and Echo smart speaker to more questionable attempts like flying home security drones, children's video phones and even a $1,600 home robot.

Still, the slimmed-down team has its hands full. On Wednesday, Amazon introduced at least 10 new devices, including the first speaker under the Amazon Fire TV brand and a new device category called Echo Hub, a wall-mounted smart home control panel. But the most notable development is the application of generative AI to voice assistant Alexa. Alexa has been an integral part of Amazon's offerings since its first smart speaker came out in 2014.

Amazon on Wednesday previewed an enhanced version of Alexa using generative AI technology, with outgoing hardware chief David Limp speaking to the digital assistant through the company's newly released Echo Show 8 visual speaker. The new version of the assistant will be ready early next year, and Limp notes that the upgraded assistant will even work on Amazon's first smart speaker, launched nine years ago.

Generative AI has taken the tech world by storm this year, and Amazon hasn't been outdone on the matter: Chief Executive Andy Jassy mentioned the term 21 times during the company's most recent earnings call last month. But the company, which runs the world's largest public cloud computing business, has yet to announce major new services based on generative AI technology, at least not to the extent that Microsoft (MSFT) and Alphabet (GOOG) 's Google (GOOG) have.

This has left an image of Amazon as a laggard: Morgan Stanley analyst Brian Nowak noted in a June report that Amazon's AWS cloud computing business is "still viewed as an underdog by investors." Amazon shares have surged 63 per cent this year as the company has addressed overcapacity in its core retail business, but they still lag behind Microsoft and Google parent Alphabet over the past 12 months. The public release of the ChatGPT chatbot in late November ignited the market's hype around AI, and a few months later, Microsoft and Google both began mapping out their visions for the technology.

A generative AI-powered Alexa alone won't change Amazon's stock; Amazon shares were relatively flat during Wednesday's event. But the move is an early sign of Amazon's ambitions to push the technology beyond its vast base of enterprise cloud customers. The company said earlier this year that it has sold more than 500 million Alexa devices to date.

For Amazon, the real payoff will still come from embedding generative AI further into its cloud computing business, which currently generates more than $85 billion a year and accounts for most of the company's profits. Amazon's annual cloud event AWS Re:Invent, to be held at the end of November, could be crucial; Analysts expect Amazon to make a series of AI-related announcements at that time, which could help the company close the gap with Microsoft and Google.

Alexa, the more chatty voice assistant, may just be a warm-up.