Amazon's "Win-Win Situation": $50 Billion Partnership with OpenAI and Increased Investment in Self-Developed Chips

Caixin February 28 News (Editor: Xia Junxiong) E-commerce giant Amazon announced on Friday a strategic partnership with OpenAI, including an investment of up to $50 billion.

In addition to Amazon, Nvidia and SoftBank Group will each invest $30 billion in OpenAI, bringing OpenAI’s pre-money valuation to $730 billion.

As part of the agreement, OpenAI will increase its use of Amazon Web Services (AWS) infrastructure and commit to deploying 2 gigawatts of Amazon Trainium AI chips for its new enterprise platform called “Frontier.”

This agreement marks a significant strategic shift for Amazon. Previously, Amazon maintained close ties with Anthropic, a major competitor of OpenAI.

Since 2023, Amazon has invested billions of dollars in Anthropic and built a $11 billion data center campus called Project Rainier in Indiana.

Additionally, some of Amazon’s AI products rely on Anthropic’s Claude model, including the shopping assistant Rufus and the upgraded voice assistant Alexa+.

“Now, the two largest AI labs are heavily betting on Trainium,” Amazon CEO Andy Jassy said in an interview on Friday.

Jassy stated that the deal with OpenAI will not change its relationship with Anthropic.

“Anthropic has multiple partners, and so do we,” Jassy said. “This relationship will remain strong, and we are excited about establishing a long-term partnership with OpenAI.”

Amazon’s massive investment comes with conditions. Reportedly, Amazon will initially invest $15 billion, followed by an additional $35 billion “over the coming months.”

According to regulatory filings, the second investment depends on OpenAI achieving certain undisclosed milestones and completing an initial public offering (IPO) or direct listing in the U.S.

The documents show that if Amazon does not complete the $35 billion investment by December 31, 2028, the agreement will be terminated, possibly earlier in some cases.

Media reports previously suggested that one of the milestones might be for OpenAI to achieve Artificial General Intelligence (AGI) to qualify for the $35 billion investment.

AGI refers to artificial intelligence capable of performing most tasks at or above human level.

Analysts: Collaborating with OpenAI Benefits Amazon’s In-House Chips

This strategic partnership is a major win for AWS. Currently, AWS is competing with Microsoft, Google, and Oracle for lucrative AI cloud service orders. The collaboration may also ease Wall Street’s concerns about Amazon’s $200 billion capital expenditure this year, most of which will be spent on AI-related investments, including data centers, chips, and networking equipment.

Amazon’s stock price has fallen for nine consecutive days after the February 5 earnings report, erasing over $450 billion in market value.

William Blair analyst noted that with the partnership with OpenAI coming to fruition, “the bearish logic is collapsing,” as AWS has established important collaborations with two leading AI labs, both of which are using its custom chips.

Andrew Graham, managing partner at Jackson Square Capital, said that the commitment to deploying Trainium chips “indicates Amazon is becoming a more significant player in the custom chip field.”

He added that this will put Amazon in direct competition with chip manufacturers like Broadcom and Google, and could even threaten Nvidia’s dominance in the chip market.