Amazon may put $10B into OpenAI to secure long-term compute

Amazon is negotiating an investment of about $10 billion in OpenAI at a valuation above $500 billion, according to Reuters. Anonymous sources described the recent talks as “very fluid.” The discussions focus on securing long-term access to computing capacity for training and running large AI models.

OpenAI has been expanding infrastructure to meet demand for ChatGPT and related services. In November, the company agreed to buy $38 billion of cloud services from Amazon, according to people familiar with that agreement. People briefed on the current talks indicate OpenAI plans to use Amazon’s Trainium chips, which compete with accelerators from Nvidia and Google, to diversify its hardware supply.

Financing from Amazon could be part of a broader capital raise that brings in additional investors, according to people involved in the discussions. OpenAI is also in talks to provide an enterprise version of ChatGPT for Amazon’s internal use, and it remains unclear whether any arrangement would connect with shopping features Amazon is developing for its apps.

The negotiations coincide with OpenAI laying groundwork for a potential initial public offering that could value the company at up to $1 trillion, according to people familiar with the plans. The company now operates as a public benefit corporation controlled by a nonprofit, a setup that permits outside investment while preserving nonprofit oversight.

Microsoft holds a 27% stake in OpenAI and has an exclusive right to sell OpenAI models to its cloud customers. The structure links the nonprofit board’s financial outcome to OpenAI’s performance and allows the company to work with multiple technology providers for computing resources.

Spending on AI infrastructure is rising. This year, OpenAI reached multi-billion-dollar agreements with companies including Nvidia and Oracle for chips and cloud capacity. Investors are watching whether demand for AI software will support the scale of investment and whether revenue from enterprise and consumer products will cover data center and specialized hardware costs.

As we reported earlier, partners plan nearly $100 billion of debt for OpenAI-linked U.S. data centers, with about $30 billion raised and banks negotiating $38 billion for Oracle and Vantage. 

OpenAI has limited borrowings and last year secured a $173 billion credit line that remains undrawn. Most borrowing sits with counterparties and lenders. Executives told partners they plan to use debt to support long-term compute deals after entering about $1.4 trillion in chip and data center commitments over eight years, versus expected annualized revenue of $20 billion this year.