OpenAI's Funding Advantage Over Rivals Grows
Talk about an endorsement! For all the talk about OpenAI falling behind Google, the ChatGPT maker doesn’t seem to be having any problems attracting big backers. Last week it was Disney, putting in $1 billion, and soon it’s likely to be Amazon, judging from The Information’s scoop on Tuesday night that Amazon was in talks to invest more than $10 billion in OpenAI. On top of that, tonight we scooped the news that OpenAI is discussing with some investors raising as much as $100 billion.
All this means it will be harder for others on the front lines of AI development to keep up. Google, at least, has the resources to do so, given that it has a hugely profitable ad business and a money-making cloud business that’s directly benefiting from new AI services. Anthropic has the backing of Amazon and Google, and its business appears to be flourishing. The big questions hang over Meta or xAI, which are trying to compete with Google and OpenAI in AI models but without an obvious business model to earn a return on the development costs. (See here for more on xAI’s efforts to develop a business model.)
One possibility is that one of those companies folds. You can imagine a day in a couple of years when Meta gives up on developing its own AI models and decides to use Google’s, say, or maybe OpenAI’s. Musk is in a different position, having a vast empire that encompasses self-driving cars, robots and rockets. Maybe he will find a way to stick it out on his own.
An unanswered question is why Amazon would invest billions in OpenAI, particularly as it is already allied with Anthropic. The answer may be simple: CEO Andy Jassy has decided OpenAI will be one of the big winners in AI and is worth getting close to. By taking a stake in the company, Amazon could benefit financially if OpenAI succeeds. There's also potential business benefits: OpenAI has already committed to spend $38 billion on Amazon Web Services over several years, to be sure, but by investing Amazon could win more cloud business in the future. The investment could also help Amazon win over OpenAI as a customer for its Trainium chips, according to our report, which would be meaningful. There’s also the chance the two companies could work together on things like shopping or the development of agents. Moreover, if helping OpenAI succeed weakens Amazon’s rival Google, so much the better. (Meanwhile, Amazon today shook up its AI team.)