Amazon (NASDAQ:AMZN) is making a serious move in the AI race with plans to roll out a new “reasoning” model under its Nova brand by June. This model aims to compete head-on with OpenAI and Anthropic by blending rapid responses with more advanced, long-form reasoning. Amazon’s goal? To land in the top five on key AI benchmarks for software development and math skillswhile keeping costs lower than rivals. Given that its existing Nova models are already 75% cheaper than third-party alternatives on its Bedrock AI platform, Amazon is positioning itself as the cost leader in an increasingly competitive space.

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This puts Amazon in an interesting spot. Despite pouring $8 billion into Anthropicone of its AI competitorsthe company is going all in on its own proprietary AI development. Meanwhile, Anthropic has just launched its Claude 3.7 Sonnet model, which uses a similar hybrid reasoning approach. With Google (NASDAQ:GOOG) and OpenAI also in the mix, the AI arms race is heating up, and Amazon is making it clear it wants to own more of the action rather than just backing external players.

But Wall Street isn’t fully sold yet. Amazon’s cloud business, a major AI driver, saw a solid 19% revenue increase last quarter to $28.79 billion, but growth has flattened, leaving investors questioning whether AI investments are moving the needle financially. At the same time, lower-cost AI models from Chinese upstart DeepSeek are shaking up the market, raising fresh concerns about long-term profitability. With Amazon doubling down on AI, the next few months will be critical in proving whether its high-stakes strategy pays offor becomes another costly bet in an already crowded field.

This article first appeared on GuruFocus.