Amazon demoed a generative AI-powered Alexa in September last year. There has been little news about the project since, besides some reports about a potential launch later this year. Shipment of the new Alexa is being delayed due to structure dysfunction and technology challenges within Amazon. Former Amazon employees say that the company is desperately behind its Big Tech rivals in the race to launch AI chatbots and agents. The new Alexa is reportedly still not ready for a prime time rollout and Amazon does not have enough data or access to the specialized chips needed to run large language models to compete. Amazon so far has been unable to capitalize on its partnership with Anthropic to build a better Alexa.

While hundreds of millions of customers own Alexa-enabled devices, Amazon's bet that people would spend meaningful amounts of money to buy goods on its platform by talking to the voice assistant hasn't paid off. Customers mostly use Alexa to set alarms and check the weather. Amazon has lost tens of billions of dollars on its devices business. The company will launch a paid tier for Alexa as soon as this month as part of the plan to reverse these losses.

Amazon's Alexa division incurred a $10 billion loss in 2022 and laid off staff, highlighting the unsustainability of its loss leader strategy despite the high household penetration. As enthusiasm for smart assistants like Siri and Google Assistant also wanes, Amazon is banking on generative AI to reinvigorate Alexa's capabilities and user engagement. The company's focus is on enhancing conversational interactions and overcoming the "smart timer" limitation.

Amazon will release a revamped version of its Alexa voice assistant in October. It will be powered by AI models from Anthropic's Claude rather than Amazon's own in-house AI technology, as Amazon's internal software reportedly struggled with performance issues during initial testing. The new Alexa will enable users to engage in more complex, context-aware conversations with the assistant. Amazon plans to offer the upgraded Alexa as a paid subscription service, separate from existing Prime memberships, with pricing likely to be between $5 to $10 per month.