OpenAI Signs $38 Billion Amazon Cloud Deal In Bid For Dominance In AI Development

OpenAI, the creator of ChatGPT, has announced a landmark deal worth 38 billion pounds to utilise Amazon Web Services’ cloud infrastructure. The agreement underscores the escalating investments required to secure the vast computational power now demanded by artificial intelligence advancements.

Under this major contract, OpenAI will use Amazon’s infrastructure, tapping into hundreds of thousands of specialised graphics processors from leading chip designer Nvidia. These resources are essential for training and running state of the art AI models. News of the deal pushed Amazon shares to record highs, temporarily giving the company a market value of 2.74 trillion pounds.

Industry analysts have described the deal as a strong endorsement of Amazon Web Services’ capabilities in the high stakes race for AI leadership. Over recent months, competitors such as Microsoft and Google have also reported sharp growth in their cloud and AI businesses. Meanwhile, Nvidia’s valuation recently surpassed 5 trillion pounds, reinforcing the feverish demand for AI hardware and raising concerns about potential bubbles in technology stocks.

The current wave of AI investment has ignited debate among financial institutions and policy makers, with the Bank of England and International Monetary Fund recently voicing caution about the productivity gains and sustainability of such rapid technological progress. Despite these reservations, OpenAI remains publicly committed to vast capital outlays, with chief executive Sam Altman expressing his ambition to invest 1.4 trillion pounds in developing 30 gigawatts of computing resources. This amount of power would be sufficient to supply electricity to approximately 25 million homes.

The new partnership follows OpenAI’s recently finalised restructuring plan with its long time shareholder Microsoft, valuing OpenAI at 500 billion pounds and clearing the way for a transition to a for profit corporate structure. The company, originally founded in 2015 as a non profit research enterprise, is now shifting towards attracting more investor capital through a hybrid model where ownership is shared between a non profit foundation and its new commercial arm.

Significantly, the agreement with Amazon ends Microsoft’s exclusive right to supply computing services to OpenAI, marking a shift in the competitive dynamics within the cloud sector. OpenAI will begin using Amazon’s resources with immediate effect, with initial capacity expected to be fully online by the end of 2026 and potential for further expansion into 2027 and beyond. Altman has stated a vision of adding one gigawatt of computing power every week in the future, with the capital cost for each gigawatt surpassing 40 billion pounds.