In a multi-year agreement, OpenAI agreed to pay Amazon.com $38 billion for processing power. This is the first time the AI startup and the cloud giant have worked together.
The agreement, which was made public on Monday, will assist OpenAI in meeting its quickly increasing demand for processing power. By the end of next year, Amazon plans to release all of the negotiated computing capacity to OpenAI, giving the ChatGPT developer quick access to powerful Nvidia chips located within Amazon’s data centers.
OpenAI and Amazon sign $38 billion cloud deal
Under pressure from investors to boost growth in its Amazon Web Services (AWS) division, Amazon sees the deal as a significant step in meeting demand driven by artificial intelligence. Although AWS is still the biggest cloud provider in the world, competitors like Google and Microsoft have recently surpassed it in terms of growth in cloud revenue because of their AI collaborations. After the announcement, Amazon’s stock increased by roughly 5% on Monday afternoon.
The seven-year agreement calls for OpenAI to use Amazon’s data centers to train new AI models that will be used to handle ChatGPT queries. Additionally, the business could use Amazon’s central processing units (CPUs) to power agentic AI systems, which are capable of handling complex tasks on their own.
Amazon’s step in the AI boom
The $38 billion deal is a significant first step in Amazon’s attempt to guarantee that AWS gains from the AI boom, even though it is less than OpenAI’s $300 billion agreement with Oracle and $250 billion pledge to Microsoft. Amazon wants to get a piece of the trillions of dollars that OpenAI has promised to invest in computing power over the next several years.
Amazon recently announced plans to aggressively increase the size of its data centers. Last quarter, the company reported its fastest growth since 2022, with a 20% year-over-year increase in cloud revenue. Anthropic, an OpenAI rival, now uses one of its biggest projects, a $11 billion data center campus in Indiana. Amazon anticipates that Anthropic will continue to be a significant AI client for many years after investing $8 billion in it.
Due to OpenAI’s exclusive partnership with Microsoft, Amazon was unable to sell its cloud services to the startup for years. However, after renegotiating its contract with Microsoft last month, OpenAI terminated that agreement, allowing it to enter into new agreements to satisfy growing compute demands.
In addition to signing an undisclosed agreement with Google earlier this year, OpenAI currently has nearly $600 billion in combined cloud commitments from Oracle, Microsoft, and Amazon.
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