OpenAI and Amazon sign $38 billion deal for AI computing power

SEATTLE: OpenAI and Amazon have signed a $38 billion deal that enables the ChatGPT maker to run its artificial intelligence systems on Amazon's data centres in the US.

OpenAI will be able to power its AI tools using “hundreds of thousands” of Nvidia's specialized AI chips through Amazon Web Services as part of the deal announced Monday.

Amazon shares increased more than 4% after the announcement.

The agreement comes less than a week after OpenAI altered its partnership with its longtime backer Microsoft, which until early this year was the startup's exclusive cloud computing provider.

California and Delaware regulators also last week allowed San Francisco-based OpenAI, which was founded as a nonprofit, to move forward on its plan to form a new business structure to more easily raise capital and make a profit.

“The rapid advancement of AI technology has created unprecedented demand for computing power,” Amazon said in a statement Monday. It said OpenAI “will immediately start utilizing AWS compute as part of this partnership, with all capacity targeted to be deployed before the end of 2026, and the ability to expand further into 2027 and beyond.”

AI requires huge amounts of energy and computing power and OpenAI has long signalled that it needs more capacity, both to develop new AI systems and keep existing products like ChatGPT answering the questions of its hundreds of millions of users.

It's recently made more than $1 trillion worth of financial obligations in spending for AI infrastructure, including data center projects with Oracle and SoftBank and semiconductor supply deals with chipmakers Nvidia, AMD and Broadcom.

Some of the deals have raised investor concerns about their “circular” nature, since OpenAI doesn't make a profit and can't yet afford to pay for the infrastructure that its cloud backers are providing on the expectations of future returns on their investments.

OpenAI CEO Sam Altman last week dismissed doubters he says have aired “breathless concern” about the deals.

“Revenue is growing steeply. We are taking a forward bet that it’s going to continue to grow,” Altman said on a podcast where he appeared with Microsoft CEO Satya Nadella.

Amazon is already the primary cloud provider to AI startup Anthropic, an OpenAI rival that makes the Claude chatbot.

Amazon invested $4 billion in Anthropic, an AI safety and research company in San Francisco.

Anthropic will shift most of its software operations to Amazon Web Services (AWS) data centres, utilising AWS’s in-house chips to train its AI models.

Anthropic will also receive a financial boost to cover the substantial expenses of training and maintaining large AI models.

Founded by OpenAI veterans, Anthropic has raised funding, focusing on creating safer chatbots for tasks such as summarisation, search, Q&A, and coding.

Tech giants increasingly recognise AI’s potential and harness their extensive cloud computing resources.