OpenAI Signs $38 Billion Deal with Amazon for Cloud Services
Synopsis
Exclusive business news reveals that OpenAI has signed a seven-year $38 billion deal with Amazon to buy cloud services. The maker of ChatGPT will be able to utilise hundreds of thousands of Nvidia graphics processors. The deal follows a restructuring at OpenAI which led to less dependence on Microsoft. As a result of the announcement, Amazon shares reached an all-time high leading to $140 billion in additional market value. OpenAI CEO Sam Altman, among other things, promised to spend $1.4 trillion on computing resources. The company will start using Amazon Web Services immediately with full capacity online by the end of 2026. OpenAI is also cooperating with Google and Oracle on cloud services.
Highlights
- OpenAI signs a $38 billion seven-year deal with Amazon to buy cloud services.
- With the deal, OpenAI will be able to use a couple of hundred thousand Nvidia.
- Amazon shares reach a new record boosting the company's market value by nearly $140 billion.
- OpenAI CEO Sam Altman indicated that he would spend $1.4 trillion on computing.
- The deal follows a restructuring of OpenAI that lessened its dependence.
OpenAI Makes Huge Deal With Amazon Cloud
Tech industry breaking news: OpenAI signed a seven-year $38 billion deal to purchase cloud services from Amazon. The exclusive business news comes after OpenAI's big restructuring last week, which allowed the ChatGPT manufacturer more freedom in managing operations and handling finances. The company announced the agreement on Monday. OpenAI will have access to a few hundred thousand Nvidia graphics processors to train and run their artificial intelligence models.
OpenAI CEO Sam Altman in an interview stated the startup has the intention of spending $1.4 trillion to create 30 gigawatts of computing resources. That amount of energy would be enough to power about 25 million American homes. It also serves as proof that investors still have faith in Amazon Web Services, the company's cloud division. Some investors worried that Amazon had been left behind by its rivals Microsoft and Google in the AI race.
Amazon Stock Hits Record High
Exclusive business news revealed that Amazon shares hit a record high on Monday. The company will add nearly $140 billion to its market value because of this deal. On Monday, the stock surged by 5% after it had already jumped by almost 10% on Friday. Microsoft shares dropped briefly when the news was heard.
Sam Altman said, "Scaling frontier AI requires massive, reliable computers. Our partnership with AWS not only helps but also extends the computer ecosystem that will teach the next era and make advanced AI accessible to everyone." OpenAI will be switching to Amazon Web Services immediately. By the end of 2026, all the capacity that has been planned will be available with space to grow further in 2027 and after. Amazon is going to install several hundred thousand chips in data clusters including Nvidia's GB200 and GB300 AI accelerators. These will be the devices that will make ChatGPT respond as well as train OpenAI's next models.
OpenAI Reduces Reliance on Microsoft New Deal
With the help of Amazon, OpenAI is offering weight models on Amazon Bedrock to give multiple AI models to businesses using AWS. Sam Altman stated that in the end, he would like OpenAI to add one gigawatt of computing power every week. This is a significant amount because each gigawatt currently costs more than $40 billion. OpenAI's major overhaul last week not only moved the company away from its non-profit origins but also changed the new arrangement in such a way that Microsoft no longer has the first right to supply computing services.
The relationship that OpenAI and Microsoft have built since 2019 has played a vital role in leading Microsoft to be the top AI player among other Big Tech rivals. However, the two firms have been working on reducing their dependence on each other. OpenAI has already approached Google for cloud services. Additionally, the company is said to have made a deal with Oracle to purchase $300 billion worth of computing power for approximately five years.
These massive commitments by OpenAI have caused concern on Wall Street where analysts and investors ask how the company, which is running at a loss, will be able to finance these deals. Last week, as part of the restructuring agreement, OpenAI also consented to buy $250 billion worth of cloud services from Microsoft's Azure. While OpenAI is expected to generate around $20 billion in annual revenue by the end of the year, sources have informed Reuters that the losses of company are still on the rise.
FAQs
Q: How much money is OpenAI spending on Amazon cloud services?
A: OpenAI entered into a long-term deal spanning seven years with a total value of $38 billion to acquire cloud services from Amazon Web Services.
Q: What will OpenAI get from this Amazon deal?
A: To train and run AI models like ChatGPT OpenAI obtains the usage rights of hundreds of thousands of Nvidia graphics units from Amazon.
Q: How did Amazon stock react to this news?
A: The shares of Amazon touched a new peak on Monday which added close to $140 billion to the company's market value. The stock rose by 5% on that day.
Q: Is OpenAI only using Amazon or working with other companies too?
A: OpenAI is also a user of Microsoft Azure and Google cloud services and it is reported that the company has made a deal with Oracle for $300 billion worth of computing power.
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At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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