Amazon’s $50 Billion Investment in OpenAI Could Hinge on IPO, AGI
The Takeaway
- Amazon’s potential $50 billion OpenAI investment could hinge on IPO or AGI
- Talks are part of OpenAI’s $100 billion funding round
- OpenAI discusses expanding cloud deal to include Tranium chips.
Amazon’s decision to invest up to $50 billion in OpenAI could hang on whether OpenAI goes public or reaches a loosely defined milestone known as artificial general intelligence, which generally refers to AI that is on par with human abilities, according to three people involved who have communicated with OpenAI executives.
Under the terms of the investment, which are still being negotiated, Amazon would initially invest $15 billion into OpenAI, these people said. The other $35 billion could hinge on OpenAI reaching AGI or going public, the people said. The proposed Amazon investment is part of OpenAI’s current funding round, which could top $100 billion at a valuation of $730 billion before the financing.
In addition, SoftBank and Nvidia each plan to invest $30 billion in three installments through the year as part of the round, said the people. Microsoft had been expected to invest low billions of dollars, The Information previously reported, but it could invest a smaller amount or none at all, according to two of the people.
In addition to Amazon’s investment in OpenAI, the two companies are working out the details of a separate cloud agreement. As part of it, OpenAI is in talks to significantly expand its previously announced $38 billion cloud computing deal with Amazon to include the use of Amazon’s Tranium chips, said the people.
The firms are also discussing OpenAI developing custom models for Amazon that would power its internal products, including the Alexa voice assistant, The Information has reported.
The negotiations underscore how OpenAI has increasingly intertwined its fundraising needs with agreements to sell its AI models and buy computing power to run and train its AI models. For much of OpenAI’s existence, Microsoft was its most significant backer—pouring about $13 billion into the company in exchange for the exclusive right to resell OpenAI’s models and take a 20% cut of its revenue.
But last year, as OpenAI’s compute costs soared, the ChatGPT maker embarked on a string of deals with companies for more cloud computing services, from Amazon to Coreweave. In the meantime, it’s raised increasingly large funding rounds, including $41 billion in a round led by SoftBank last year. And it’s projected needing about $665 billion over the next five years to pay for its compute costs.
Those funding needs and revenue growth have increased expectations that it could go public as soon as the fourth quarter to tap public investors for capital.
OpenAI also plans to raise money in this round from United Arab Emirates’ fund MGX, as well as a consortium of investors in the Middle East, one of the people said, though these investments would likely not be similar in scale to the SoftBank, Nvidia or Amazon commitments.
It’s not clear why reaching AGI is a potential milestone for Amazon’s full investment. However, OpenAI’s current partnership with Microsoft factors into OpenAI’s pending deal with Amazon, according to one of the people.
Microsoft currently has the exclusive right to run OpenAI models on its cloud business Azure until OpenAI reaches AGI. After that point, OpenAI could potentially agree to resell its models on other cloud providers including Amazon, which would likely be an incentive for Amazon’s full $35 billion investment.