OpenAI is in preliminary discussions to raise at least $10 billion from Amazon.com Inc., according to a report in The Information, citing sources familiar with the matter.
The potential deal would value the ChatGPT creator at more than $500 billion and include OpenAI’s adoption of Amazon’s Trainium artificial intelligence (AI) chips.
The negotiations, which began around October following OpenAI’s corporate restructuring, remain at an early stage and terms could still change, according to a person with knowledge of the talks who requested anonymity to discuss private negotiations. Discussions with Amazon reportedly include exploring commercial opportunities and potentially selling a corporate version of ChatGPT to the online retailer.
The Amazon deal could be part of a larger fundraising round involving additional investors, according to The Information. A subsequent article, also by The Information, hinted at a $100 billion funding round including Amazon that would value OpenAI at up to an astounding $830 billion.
OpenAI and Amazon declined to comment.
The investment would represent a significant win for Amazon’s semiconductor division as it seeks to challenge NVIDIA Corp.’s dominance in the AI chip market. While NVIDIA currently leads the market for high-performance AI processors, developers including Meta Platforms Inc. have begun exploring alternative offerings from competitors like Alphabet Inc.’s Google.
Amazon positions its Trainium chips as a more cost-effective alternative to NVIDIA’s market-leading graphics processing units (GPUs), claiming they can power AI model calculations more efficiently at lower prices.
For Amazon Web Services (AWS), the world’s largest cloud computing provider, the deal would strengthen its position among AI developers — a market where it has faced intense competition from Microsoft Corp., one of OpenAI’s largest existing backers.
The discussions come as OpenAI grapples with extraordinary infrastructure costs. The company has committed to spend $1.4 trillion on computing power over the next eight years, far exceeding its reported $20 billion in annual revenue.
Deutsche Bank analysts estimate OpenAI will burn through approximately $143 billion in cumulative free cash flow between 2024 and 2029 before achieving profitability. To put that in perspective, Uber accumulated roughly $18 billion in losses over six years before turning a profit. No company has ever operated at anything close to OpenAI’s scale of red ink, raising questions about whether traditional venture capital models can sustain such ambitions.
Tech analyst Scott Galloway has warned that AI investments have driven roughly 80% of stock market returns since ChatGPT’s debut in late 2022, making OpenAI’s financial trajectory critical to the entire market. With major players like Oracle Corp., AMD Inc., Broadcom Inc., and NVIDIA having structured multi-year spending plans around OpenAI’s roadmap, the interdependencies run deep. As Galloway put it, if OpenAI’s story unravels, there would be “nowhere to hide” for investors across the tech ecosystem.
Last month, OpenAI announced a separate $38 billion agreement with AWS for cloud computing capacity over seven years, centered on hundreds of thousands of NVIDIA chips. The new negotiations reportedly include provisions for OpenAI to utilize Amazon’s Trainium chips as well.
OpenAI was most recently valued at $500 billion during an employee share sale, briefly making it the world’s largest startup ahead of Elon Musk’s SpaceX. Microsoft holds 27% ownership following a restructuring that took nearly a year to complete.
OpenAI has struck several major deals this year to finance its infrastructure needs. Oracle is spending $300 billion building data centers in Texas, New Mexico, Michigan, and Wisconsin, with OpenAI expected to pay roughly the same amount to use the facilities. The company also has an arrangement with NVIDIA involving both chip purchases and equity investment.
The company is additionally considering an initial public offering that could value it at up to $1 trillion, according to Reuters.
OpenAI CEO Sam Altman recently declared a “code red” staff alert to counter growing competition, particularly from Google, whose updated Gemini AI tool has gained ground against ChatGPT and other rivals.
