Amazon shares hit a record high after a $38 billion OpenAI deal for cloud services

OpenAI has signed a seven-year, $38 billion deal to buy cloud services from Amazon.com, in the first major move to boost its AI ambitions after a restructuring last week that gave the ChatGPT maker more operational and financial freedom.The deal, announced Monday, gives OpenAI access to hundreds of thousands of Nvidia graphics processors to train and run its artificial intelligence models. It underlines the AI ​​industry’s insatiable appetite for computing power, as companies rush to build systems that can match or surpass human intelligence.

Sam Altman, CEO of OpenAI, has said the startup has committed to spending $1.4 trillion to develop 30 gigawatts of computing resources – enough to power about 25 million US homes.The deal is also a major vote of confidence for the e-commerce giant’s cloud division, Amazon Web Services, which some investors feared had fallen behind rivals Microsoft and Google in the artificial intelligence race. These concerns were somewhat alleviated by the strong growth the company reported in the September quarter.

Shares of Amazon hit an all-time high on Monday, with the company set to add nearly $140 billion to its market value. Microsoft shares briefly fell following the news.

RELIABLE COMPUTE “Scaling groundbreaking AI requires massive, reliable computing power,” said Sam Altman, co-founder and CEO of OpenAI. “Our partnership with AWS strengthens the broad computing ecosystem that will power this next era and bring advanced AI to everyone.” OpenAI will begin using Amazon Web Services immediately, with all planned capacity coming online by the end of 2026 and room to expand further in 2027 and beyond. Amazon plans to deploy hundreds of thousands of chips, including Nvidia’s GB200 and GB300 AI accelerators, in data clusters built to power ChatGPT responses and train OpenAI’s next wave of models, the companies said.

Amazon already offers OpenAI models on Amazon Bedrock, which offers multiple AI models for companies using AWS.

OpenAI’s major restructuring last week took it further away from its nonprofit roots and also removed Microsoft’s first right to refuse to provide computing services in the new arrangement.

Reuters has reported that OpenAI was laying the groundwork for an initial public offering that could value the company at up to $1 trillion.

But the rising valuations of AI companies and their massive spending commitments, which total more than $1 trillion for OpenAI, have raised fears that the AI ​​boom is turning into a bubble.

While OpenAI’s relationship with Microsoft, which the two forged in 2019, has pushed Microsoft to the top spot among its Big Tech peers in the AI ​​race, both companies have taken steps to reduce dependence on each other.

OpenAI has already tapped Alphabet’s Google to provide it with cloud services, as Reuters first reported in June. It also reportedly struck a deal with Oracle to buy $300 billion worth of computing power for about five years.