OpenAI Secures USD 38 Billion Cloud Deal With Amazon

OpenAI has signed a seven-year, USD 38 billion deal to buy cloud services from Amazon.com Inc. This marks its first major push to power its artificial intelligence ambitions following a restructuring that granted the ChatGPT maker increased operational and financial freedom.

The agreement will provide OpenAI with access to hundreds of thousands of Nvidia graphics processors. These processors are crucial for training and running its artificial intelligence models.

This deal highlights the artificial intelligence industry's substantial demand for computing power. Companies are competing to develop systems that can match or exceed human intelligence.

OpenAI CEO Sam Altman stated the startup is committed to investing USD 1.4 trillion. This investment aims to develop 30 gigawatts of computing resources, an amount roughly equivalent to powering 25 million U.S. homes.

The deal represents a significant endorsement for Amazon Web Services, the e-commerce giant's cloud unit. Some investors had concerns that AWS was trailing rivals Microsoft and Google in the artificial intelligence sector, though strong growth reported in the September quarter eased some of these worries.

Amazon shares reached an all-time high, with the company poised to add nearly USD 140 billion to its market value. The stock was last up 5%, following a near-10% jump on Friday.

Microsoft shares experienced a brief dip after the news.

"This is a hugely significant deal and is clearly a strong endorsement of AWS compute capabilities to deliver the scale needed to support OpenAI," said PP Foresight analyst Paolo Pescatore.

"Scaling frontier artificial intelligence requires massive, reliable compute," Altman stated. "Our partnership with AWS strengthens the broad compute ecosystem that will power this next era and bring advanced artificial intelligence to everyone."

OpenAI will immediately begin utilising Amazon Web Services. All planned capacity is scheduled to be operational by the end of 2026, with provisions for further expansion in 2027 and beyond.

Amazon plans to deploy hundreds of thousands of chips, including Nvidia's GB200, and GB300 artificial intelligence accelerators. These will be integrated into data clusters designed to power ChatGPT's responses and train OpenAI's upcoming models, the companies reported.

Amazon currently offers OpenAI open weight models on Amazon Bedrock. This platform provides multiple artificial intelligence models for businesses utilising AWS.

Altman expressed a desire for OpenAI to eventually add 1 gigawatt of compute every week. This represents an enormous sum, as each gigawatt currently carries a capital cost exceeding USD 40 billion.

OpenAI's extensive restructuring shifted the organisation further from its non-profit origins. This new arrangement also eliminated Microsoft's first right of refusal to provide compute services.

OpenAI was reportedly preparing for an initial public offering. This could potentially value the company at up to USD 1 trillion.

However, the surging valuations of artificial intelligence companies, and their substantial spending commitments, which exceed USD 1 trillion for OpenAI, have prompted concerns that the artificial intelligence boom may be developing into a bubble.

OpenAI's relationship with Microsoft, established in 2019, helped propel Microsoft to the forefront among its Big Tech rivals in the artificial intelligence race. Despite this, both companies have been working to decrease their reliance on one another.

OpenAI has already engaged Alphabet's Google to provide cloud services. It also reportedly reached an agreement with Oracle to acquire USD 300 billion in computing power over approximately five years.

OpenAI's substantial commitments have prompted questions on Wall Street. Analysts and investors are scrutinising how the loss-making organisation plans to finance these numerous deals. OpenAI also agreed to purchase USD 250 billion of Microsoft's Azure cloud services as part of its restructuring deal.

While OpenAI's annualised revenue run rate is anticipated to reach approximately USD 20 billion by the year's end, the organisation's losses are also increasing.

---

• OpenAI signed a seven-year, USD 38 billion cloud services deal with Amazon.com Inc.

• The agreement provides OpenAI with access to Nvidia graphics processors for training artificial intelligence models.

• OpenAI CEO Sam Altman stated a commitment to investing USD 1.4 trillion for 30 gigawatts of computing resources.

Source: REUTERS