Amazon’s $38 Billion Deal with OpenAI Signals New Phase in the AI Arms Race

How Amazon and OpenAI Plan to Power the AI Revolution

The Amazon OpenAI deal grants OpenAI access to hundreds of thousands of Nvidia GPUs, strengthening its AI infrastructure and international reach.

Amazon Web Services (AWS), Amazon’s cloud computing service, signed a $38 billion partnership with OpenAI that includes access to hundreds of thousands of Nvidia chips. The announcement pushed up Amazon stock early.

The seven-year partnership is another milestone in OpenAI’s development from a research lab to a major technology company. OpenAI has approx. $1.4 trillion in technology infrastructure investment in areas such as chips and data centers to develop and operate its AI systems, a level of investment that raises the question of a potential tech bubble.

For Amazon, this is a strong vote of confidence in its cloud computing capacity and an opportunity for the company to reassert itself as a top company in AI. “As OpenAI continues to push the boundaries of what’s possible, AWS’s best-in-class infrastructure will be the backbone of their AI ambitions,” Matt Garman, CEO of Amazon Web Services, told Bloomberg in an interview.

Financial Impact of the Amazon OpenAI Deal on Shares

Amazon shares increased by 4.5% to $255.29 in New York during early trading on Monday. Shares of Nvidia also increased by 3.3% to $209.20. AWS remains the largest provider of paid computing power globally for rent, but had previously lagged behind other competitors like Microsoft, Google, and Oracle regarding large AI hosting deals until now.

OpenAI is adding cloud partnership deals beyond AWS.

OpenAI is further diversifying its cloud partnership deals beyond AWS. Microsoft was previously the largest investor and exclusive cloud partner of OpenAI and reiterated a deal of $250 billion to use Azure. Oracle also agreed to a $300 billion deal. Google Cloud also provides support for ChatGPT, while OpenAI signed a deal with a neo cloud firm targeting AI developers called CoreWeave for $22.4 billion.

Analysts of Bloomberg Intelligence, Anurag Rana and Andrew Girard, explained that getting AWS cloud for OpenAI could relieve OpenAI of the infrastructure burden, noting that CoreWeave is a smaller cloud company compared to AWS. They noted that AWS’s worldwide scale could allow OpenAI to grow outside of the U.S.

Implementation and Future Plans

OpenAI will start utilizing AWS computing resources immediately. The full capacity is forecasted to become operational by the end of 2026. This agreement will also allow OpenAI to expand the partnership in the future.

Additionally, this agreement further substantiates Amazon’s position within the competitive market of cloud computing and highlights the increasing importance of AI infrastructure. Analysts predict that AWS’s global reach may allow OpenAI to scale operations more rapidly and assist a larger international set of users.

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