OpenAI May Partner with Amazon, Signaling Nvidia AI Threat

OpenAI is said to be in talks with Amazon regarding a possible funding deal of $10 billion or more. The talks would also include the adoption of Amazon’s Trainium chips for AI training, based on information from people who know what is going on. This could potentially alter the situation in the AI chip market that Nvidia has dominated for a long time.

If the deal materializes, OpenAI’s worth could soar past the $500 billion mark, thus indicating a major change in the AI hardware ecosystem. The negotiations come after it was disclosed that Meta Platforms was considering using Google’s tensor processing units instead of Nvidia’s GPUs, which is a clear sign of the rivalry among the AI chip manufacturers and suppliers.

For Amazon, this partnership is not only about funding but also getting its semiconductor division noticed as a potential supplier. In the meantime, Nvidia still holds the largest market share of 90% when it comes to AI chips, but many tech giants like Meta and OpenAI are, at the same time, re-evaluating their alliance with Nvidia and looking towards Amazon and Google for competitive alternatives.

According to insiders, OpenAI started negotiating with Amazon back in October coinciding with a corporate revamp at the AI firm. That revamp involved Microsoft acquiring a 27% ownership share, which was a lengthy process lasting about a year. The restructuring allowed OpenAI to unlock more financing options and brought it closer to potential partners from a wider range of technology companies.

Amazon Web Services (AWS) has been working on AI-specific chips since 2015. Its devices are becoming progressively more crucial for AI companies that are trying to cover the expanding demand for computing power. AWS presented its Inferentia chips in 2018 and has lately rolled out the latest generation of Trainium chips.

OpenAI has been very proactive in terms of building up its infrastructure partnerships. The company has also been involved in agreements worth over $1.4 trillion in recent months, mainly with chip manufacturers such as Nvidia, AMD, and Broadcom. In November, OpenAI completed a contract worth $38 billion with AWS to secure cloud resources and, thus, became the new cloud provider's main customer.

The possible Amazon investment is happening together with the ongoing investigation into Nvidia's so-called "circular deals" in AI. Nvidia, in September, disclosed the intention to allocate $100 billion for investing in OpenAI, but the contract is still pending according to Kapoor Kress the CFO.

Since the year 2019, Microsoft has put more than $13 billion to work in OpenAI, while Amazon has been backing OpenAI's rival Anthropic for at least $8 billion. A month ago, Microsoft reported a potential investment of $5 billion in Anthropic, with Nvidia also committing $10 billion to the startup.

All of this is pointing towards more diversified ways of accessing AI hardware and funds, as the tech giants are trying out different paths to Nvidia's GPU dominance and at the same time are raising competition in the AI semiconductor market.