Amazon AI Strategy Reportedly Shifts Before Earnings, Nova AI Models Put In ‘Keep The Lights On’ Mode

Amazon is shifting resources away from most of its flagship Nova AI models and prioritizing a new foundation model under development, according to a Business Insider report.

• The reported AI restructuring follows layoffs in Amazon's AGI organization and the closure of its AGI Lab last week.
• The new initiative is reportedly led by Pieter Abbeel and is expected to produce a flagship model that could debut at Amazon's re:Invent conference later this year.
• Evercore ISI reiterated an 'Outperform' rating and a $315 price target, saying second-quarter revenue estimates appear achievable with more upside than downside risk.

Shares of Amazon (AMZN) traded flat in pre-market hours on Tuesday after a report said the company is reshaping its artificial intelligence strategy by scaling back development of several flagship Nova AI models. 

The report comes ahead of Amazon's quarterly earnings on Thursday, following five consecutive losing sessions for the stock. Retail sentiment on Stocktwits around AMZN stock remained in ‘bullish’ territory over the past day. 

AMZN stock performance year-to-date. | Source: Koyfin

Amazon Reportedly Reworks AI Strategy Ahead Of Earnings

According to a Business Insider report, Amazon has begun winding down active development of several of its flagship Nova models, including the high-end Premier and Omni models, as well as the Reel video-generation model and Canvas image-generation model, citing people familiar with the matter.

The reported changes come shortly after layoffs within Amazon's Artificial General Intelligence (AGI) organization and the closure of AGI Lab, a research unit the company formed in 2024 after hiring much of the team behind AI startup Adept.

Some employees reportedly described the affected Nova models as being in "KTLO," or "keep the lights on," an engineering term referring to software that continues to receive maintenance and customer support but is no longer a primary focus for development.

Frontier AI Model Takes Priority

According to the report, Amazon has shifted engineering talent and computing resources toward a new initiative known internally as Frontier Model Research (FMR). The effort is led by Pieter Abbeel, who joined Amazon following its acquisition of AI robotics startup Covariant.

The project has reportedly become one of Amazon's top AI priorities this year. The company is developing a new flagship foundation model that could debut at its annual re:Invent conference later this year.

The reported shift does not necessarily mean Amazon is abandoning the Nova platform. Business Insider said Amazon continues to support Nova 2 Sonic, Nova 2 Lite, Nova Forge, which helps customers build and customize AI models, and Nova Act, its AI agent platform. The upcoming flagship model could also eventually be released under the Nova brand.

Wall Street Stays Bullish Before Results

Evercore ISI reiterated its 'Outperform' rating and maintained a $315 price target on the stock. The firm expects Amazon to deliver second-quarter results broadly in line with consensus estimates.

Evercore said Wall Street's revenue forecast of roughly $196 billion, representing about 17% year-over-year growth and 9% sequential growth, appears achievable and carries more upside than downside potential.

For updates and corrections, email newsroom[at]stocktwits[dot]com<