This week, Amazon Confirmed to be working with artificial intelligence OpenAI is in talks to raise at least $10 billion in an investment, and may also use Trainium, an AI chip developed by Amazon Web Services (AWS).
OpenAI completed its restructuring in October and now has more freedom to seek external funding and collaborate with other companies, following its previous partnership with Microsoft. The businesses are deeply intertwined, and Microsoft 's cloud business directly competes with Amazon AWS.
On the other hand, Amazon has invested at least $8 billion in OpenAI's competitor, Anthropic. But with the rise of cyclical deals within the AI industry, a collaboration between Amazon and OpenAI seems "reasonable," given that Microsoft also invested in Anthropic last month.
The deal between OpenAI and Amazon appears to be a forced union, as OpenAI needs more funding to cover its expenses, while Amazon needs a heavyweight customer to validate its Trainium chip .
Business tactics
Cloud infrastructure investor Charles Fitzgerald pointed out that OpenAI signed a $38 billion computing power agreement with AWS last month, but OpenAI simply doesn't have the funds to fulfill its promises; it's a sham deal, or at least just a framework.
In his view, Amazon's $10 billion investment is precisely the means to fill this gap. Amazon will transfer $10 billion from its balance sheet to OpenAI's account, and OpenAI will then use cloud computing... The funds will be returned to AWS under the guise of an expenditure.
This resulted in Amazon's cloud computing revenue increasing by $10 billion, earning it praise on Wall Street for its business growth, while OpenAI gained $10 billion worth of computing power for free. Furthermore, OpenAI's use of Trainium chips demonstrates to the industry that its chips have gained the approval of industry leaders.
Anshel Sag, principal analyst at Moor Insights & Strategy, said that ChatGPT is still considered a representative product in the field of artificial intelligence, and if OpenAI uses AWS hardware on a large scale, it would be a huge support for that hardware.
Sag believes that Amazon's chips may not be as good as Nvidia's in terms of raw performance. Their latest products are more readily available and may even be superior in commercial applications.
However, Fitzgerald also warned that Amazon's choice to have OpenAI boost chip visibility might be a mistake. Under this collaboration model, Amazon would be responsible for the computationally intensive tasks of building new models, which are costly to implement, have a short-lived profitability cycle, and constantly face the risk of becoming obsolete with each new chip generation.
At the same time, Fitzgerald also pointed out that OpenAI's integration of Amazon into its ecosystem reduces its reliance on Microsoft, which resembles a strategy to intensify competition among suppliers, as OpenAI can compete with Nvidia , Microsoft, or Oracle. They demanded more favorable services, or threatened to cooperate with Amazon.
He added that OpenAI is betting on the importance of its technology and the impact on the entire industry should it collapse, so that other companies in the industry will continue to fund the entire ecosystem in order to remain competitive.
(Article source: CLS)
