Following a series of significant agreements to acquire vast amounts of computing power from chip manufacturers Nvidia and AMD, and cloud provider Oracle, artificial intelligence powerhouse OpenAI has now finalized a groundbreaking multi-billion dollar deal with Amazon.
On Monday, OpenAI announced its commitment to purchase $38 billion in cloud computing services from Amazon over the next seven years. This substantial boost in processing capability is crucial for OpenAI to further develop and deploy its advanced AI technologies, including its popular ChatGPT chatbot.
Historically, from 2019 to 2023, OpenAI relied exclusively on Microsoft for its computing needs as part of a tightly integrated partnership. Their initial contract mandated that OpenAI procure services solely from Microsoft, its primary investor, unless specific approval was granted for deals with other companies.
However, over the past 18 months, OpenAI voiced concerns about not receiving sufficient computing power from Microsoft. This led the tech giant to grant permission for the startup to forge separate agreements with two other cloud service providers.
Just last week, Microsoft and OpenAI revised their contract, liberating OpenAI to procure services from any cloud computing company without requiring Microsoft’s prior consent.
This $38 billion agreement with Amazon, coming mere days after the contract renegotiation, underscores OpenAI’s aggressive strategy to rapidly expand the already immense computing infrastructure powering its ambitious goals. The company is also actively involved in establishing new computer data centers in collaboration with Oracle, Japanese conglomerate SoftBank, and entities in the United Arab Emirates, among others.
To support the construction of these new data centers, OpenAI has also entered into complex financial arrangements with prominent chipmakers like Nvidia, AMD, and Broadcom.
As OpenAI secures hundreds of billions of dollars in additional computing resources, it finds itself in a heated race to match the pace of the tech industry’s largest players. Over the past year alone, giants such as Amazon, Google, Meta, and Microsoft collectively allocated over $360 billion towards capital expenditures.
With both OpenAI and these tech titans escalating their investments, some financial analysts and tech historians are expressing apprehension about the potential for a dangerous bubble forming within the industry. Artificial intelligence, despite its rapid advancements, remains an unproven and costly technology that may require years to reach full maturity and profitability. While OpenAI, a clear market leader, generates billions in annual revenue, it has yet to achieve overall profitability.
(It’s worth noting that The New York Times has filed a lawsuit against OpenAI and Microsoft, alleging copyright infringement related to AI systems. Both companies have refuted these claims.)