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How Amazon's massive stake in OpenAI could boost its AI and cloud businesses
The deal could ease some of Wall Street's fears about Amazon's monster $200 billion capex spending, and accelerate its development of AI tools.
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How Amazon's massive stake in OpenAI could boost its AI and cloud businesses
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Key Points
- Amazon deepened its ties to OpenAI by committing to invest up to $50 billion in the ChatGPT maker.
- The companies also forged a new strategic partnership that will see OpenAI buy more of Amazon's custom AI chips, and make its models available to Amazon engineers to develop consumer products.
- The deal could ease some of Wall Street's fears about Amazon's monster $200 billion capex spending, and accelerate its development of AI tools.
In this article
- AMZN
['A very strong, long-term partnership': OpenAI CEO and Amazon CEO on new strategic partnership]
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VIDEO9:5409:54
'A very strong, long-term partnership': OpenAI CEO and Amazon CEO on new strategic partnership
Amazon on Friday unveiled a strategic partnership with OpenAI that includes an investment of up to $50 billion, the latest sign of deepening ties between the tech giant and the maker of ChatGPT.
As part of the deal, OpenAI will use more Amazon Web Services infrastructure, including a commitment to deploy 2 gigawatts of the company's Trainium artificial intelligence chips for its new enterprise platform, called Frontier.
"Today, we now have the two largest AI labs who are both significantly betting on Trainium," Amazon CEO Andy Jassy told CNBC's Andrew Ross Sorkin on Friday.
The pact marks a significant shift for Amazon, which has forged a strong relationship with OpenAI's primary rival, Anthropic.
Amazon has pumped billions of dollars into Anthropic since 2023, and put up an $11 billion data center campus for the company in Indiana called Project Rainier.
The company also partly relies on Anthropic's Claude models for some of its AI products, including shopping aide Rufus, and Alexa+, a revamped version of its digital assistant.
Jassy told CNBC Friday that the OpenAI deal doesn't change its relationship with Anthropic.
"[Anthropic has] always had multiple partners, and we do too," Jassy said. "And so that relationship will stay strong, and we're really excited about the partnership we're building over a long period of time with OpenAI."
Amazon and OpenAI also agreed to jointly develop "customized models" for Amazon's engineering teams to power its consumer products.
OpenAI will spend $100 billion on AWS over the next eight years, an expansion of its existing $38 billion agreement signed last November.
The partnership was announced in tandem with OpenAI's broader $110 billion funding round, which also includes $30 billion from Nvidia and $30 billion from SoftBank.
The deal continues a trend of OpenAI diversifying beyond its longstanding partnership with Microsoft, Amazon's top cloud computing rival. Microsoft first backed OpenAI in 2019, and has committed to invest more than $13 billion in the startup. Microsoft also invested $5 billion in Anthropic last November.
In a joint statement on Friday, OpenAI and Microsoft said their partnership remains "strong and central."
"Microsoft maintains its exclusive license and access to intellectual property across OpenAI models and products," the companies wrote. "Collaborations like the partnership between OpenAI and Amazon were always contemplated under our agreements and Microsoft is excited to see what they build together."
The details
Amazon's massive investment in OpenAI has some conditions. The companies said Amazon will start with an initial commitment of $15 billion, followed by another $35 billion "in the coming months."
The second tranche is contingent upon OpenAI hitting certain unspecified milestones, as well as the company completing "an initial public offering or direct listing of equity securities" in the U.S., according to a regulatory filing.
The parties' obligations under the agreement will terminate if Amazon hasn't invested $35 billion by Dec. 31, 2028, "which date may accelerate under certain circumstances," the filing states.
One of the milestones may be that OpenAI must reach artificial general intelligence in order for it to receive the $35 billion from Amazon, The Information reported earlier this week, citing people familiar with the matter. Amazon declined to comment on the report.
AGI refers to AI that can perform as well or better than humans on most tasks.
The strategic partnership represents a major win for AWS, which is competing with Microsoft, Google and Oracle for highly lucrative AI deals for cloud services.
It also may help ease Wall Street's concerns around its hefty $200 billion capex forecast this year. The bulk of its spending is expected to go to AI-related initiatives, including data centers, chips and networking equipment.
[Amazon working with OpenAI is important for it competitively, says Rosenblatt's Barton Crockett]
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VIDEO4:3204:32
Amazon working with OpenAI is important for it competitively, says Rosenblatt's Barton Crockett
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