In a significant move, OpenAI has announced an agreement with Amazon Web Services (AWS) to procure a staggering $38 billion worth of compute resources. This deal marks a pivotal moment, representing OpenAI's first major collaboration with a leading cloud infrastructure provider and unveiling a new strategy to diversify its computing sources away from exclusive reliance on Microsoft (MSFT).
Under the agreement, announced on Monday, OpenAI will immediately begin running workloads on AWS infrastructure, utilizing hundreds of thousands of NVIDIA (NVDA) graphics processing units (GPUs) within the United States. The company plans to scale its compute footprint in the coming years.
The announcement led to a surge in Amazon's (AMZN) stock by approximately 4.5% on Monday, contributing to an overall positive market sentiment. The Dow Jones Industrial Average opened up 0.28%, the S&P 500 index increased by 0.53%, and the Nasdaq composite gained 0.96%.
The initial phase of the agreement will leverage existing AWS data centers, while Amazon will eventually construct additional infrastructure specifically for OpenAI.
Although this deal is relatively small compared to OpenAI's previous contracts with other tech giants, it represents a significant strategic win for Amazon and a critical step in its pursuit to capitalize on the "AI compute war."
Recently, OpenAI has announced a flurry of massive agreements with companies like NVIDIA, Broadcom (AVGO), Oracle (ORCL), and Google (GOOG), totaling approximately $1.4 trillion. These deals have raised concerns about the risks of an AI bubble and whether the U.S. possesses the energy and resources necessary to translate these ambitious promises into reality.
Until recently, OpenAI maintained an exclusive cloud partnership with Microsoft. Microsoft first invested in OpenAI in 2019, with total investments reaching $13 billion. In January of this year, Microsoft announced that it would no longer be OpenAI's exclusive cloud service provider, shifting to a partnership model that grants it a "right to purchase upfront for new capacity.""
Microsoft's status as a preferred partner expired last week, according to newly negotiated commercial terms with OpenAI, allowing the ChatGPT developer to collaborate more broadly with other hyperscale cloud providers. Even before that, OpenAI had reached cloud collaboration agreements with Oracle and Google, but AWS remains the largest cloud provider in terms of market share.
“The scale at which cutting-edge AI is developed requires massive and reliable compute power,” said Sam Altman, CEO of OpenAI, in a statement on Monday. “Our partnership with AWS will strengthen the broad compute ecosystem, powering the next generation of AI and enabling advanced AI technologies to benefit everyone.”
OpenAI continues to invest heavily in Microsoft, and the company reaffirmed its commitment last week to purchase an additional $250 billion of Azure cloud services.
For Amazon, the significance of this agreement lies both in the sheer size of the deal and in the cloud giant's close relationship with Anthropic, a competitor to OpenAI. Amazon has already invested billions of dollars in Anthropic and is currently building an $11 billion data center campus in New Carlisle, Indiana, specifically designed for Anthropic's workloads.
Underscoring the importance of the agreement, Matt Garman, CEO of AWS, stated, “AWS’s breadth of compute and instant availability demonstrate why we are uniquely positioned to support OpenAI’s massive AI workloads.”
Amazon’s earnings released last week showed AWS revenue growth of over 20% year-over-year, surpassing analyst expectations. However, Microsoft and Google both posted faster growth in their cloud businesses, expanding by 40% and 34%, respectively.
The current agreement with OpenAI explicitly stipulates the use of NVIDIA chips (including two popular models from the Blackwell series), but it is expected to incorporate more chip types in the future. Amazon’s custom-developed Trainium chips are currently being used in Anthropic’s new facility.
“We’re optimistic about Trainium chips because they provide customers with better value for money and do offer customers more choices,” Brown reported. But he added, “We cannot currently disclose details of our collaboration with OpenAI on Trainium chips.”
The infrastructure will support both inference (such as powering ChatGPT’s real-time responses) and the training of next-generation frontier models. Over the next seven years, OpenAI can scale compute via AWS as needed, but plans beyond 2026 are not yet finalized.
OpenAI’s foundation models (including so-called open-source weight models) are available on AWS’s Bedrock platform, which is a managed service launched by AWS to access mainstream AI systems.
Companies such as Peloton (PTON), Thomson Reuters (TRI), Comscore (SCOR), and Triomics are using OpenAI models on AWS, in applications ranging from programming, math problem-solving, and scientific analysis to intelligent agent workflows.
Monday's announcement marks the beginning of a more direct cooperative relationship between OpenAI and Amazon.
“As part of the agreement, OpenAI is a customer of AWS,” Brown said. “They’re committed to buying compute resources from us, and we charge OpenAI accordingly, and the whole collaboration model is very straightforward.”
For OpenAI, the highest-valued private AI company, the agreement with AWS is another step toward preparing for an eventual initial public offering. By diversifying its cloud partners and securing long-term compute capacity with multiple providers, OpenAI is signaling “independence” and “operational maturity.”
Altman recently admitted in a livestream that, considering OpenAI’s funding needs, “an IPO is the most likely path.” CFO Sarah Friar has expressed a similar view, stating that recent company restructurings are necessary steps to prepare for an IPO.
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