I agree with you that the profit comes from higher level services built on top.

But I think you are making it sound like Amazon's moat is that it came up with its own technology behind its services.

A lot of times AWS was just grabbing a bunch of popular open source stuff off the shelf and hosting it (e.g., RDS, EKS, etc). Yes there is some R&D work but almost none of what Amazon has come up with is rooted in their own work.

The value they give you is the hosting, maintenance, and compliance of all these services. If you're paying AWS extra to host your database on RDS or your Kubernetes cluster in EKS, you're generally not paying AWS to come up with a better database than anyone else, you're just paying them to help you manage permissions, backups, replication, and other maintenance/compliance/management issues that a company needs for its internal services.

In other words, Amazon's AI customers don't need Amazon to build models. They just need Amazon to use someone else's models, host them on private enterprise compute that easily ties in to existing infrastructure, RBAC, etc, and make everything compliant and easy to maintain. A whole lot of the value is being able to answer audits with "AWS handles our database backups/data security/etc" rather than saying "we have a great ops team and here's all our proof that we handle our database backups/data security/etc properly."

I think it's actually explicitly Amazon's job to sit this one out, especially since they never successfully made a good business or consumer ecosystem device like a smartphone or PC operating system.