BREAKINGVIEWS-Amazon-OpenAI tie-up would be hedge for both sides

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Karen Kwok

LONDON, Dec 17 (Reuters Breakingviews) - Amazon.com AMZN.O has chips to sell. OpenAI needs them, and lots of computing power too. That makes the cloud giant’s potential $10 billion investment in the ChatGPT developer a logical mutual hedge. The $2.4 trillion cloud-to-e-commerce giant gets demand for its hardware, while OpenAI reduces its reliance on Nvidia’s NVDA.O expensive and scarce processors.

Amazon is in talks to invest around $10 billion in OpenAI, valuing the firm at over $500 billion, Reuters reported on Tuesday. At first glance, the move is odd. The sum would surpass the $8 billion Amazon has already sunk into Anthropic, which is OpenAI’s top rival and also backed by Amazon’s biggest cloud competitor, Microsoft MSFT.O. It’s also significant: the cheque is equal to roughly a quarter of Amazon’s expected free cash flow in 2026, per Visible Alpha.

These types of circular artificial intelligence deals, like OpenAI and Nvidia’s, are becoming commonplace. Exactly how Amazon’s one might be structured isn’t clear. Amazon's CEO Andy Jassy could pay in cash, cloud-computing credits or a bundled agreement that locks in usage. Compute credits seem likely: OpenAI said last month it would spend $38 billion renting servers from Amazon Web Services (AWS) over seven years.

OpenAI boss Sam Altman’s hedge is against Nvidia. Cosying up with Amazon could reduce his reliance on Nvidia’s powerful but scarce and costly chips. Amazon’s alternatives are cheaper, even if their performance remains unproven at scale.

Amazon’s hedge is arguably more important. AWS already leads the cloud market with an estimated 44% share this year, ahead of Microsoft’s 30% and Google’s 19%, per Coatue. But its business with Anthropic will generate just $1.6 billion of revenue from so-called inference in 2025, Barclays analysts reckoned in September, referring just to the processing power used when a user queries a model. That's small compared to the $128 billion AWS is expected to bring in this year, using analyst estimates gathered by Visible Alpha. Bringing OpenAI onto its platform would widen Amazon’s lead and tie down more of the fast-growing revenue from AI workloads to its cloud platform AWS.

A stake in OpenAI might also give Amazon leverage over Altman's model developer and its 27% shareholder Microsoft. The Windows maker still retains preferential rights to sell some of the startup's products to cloud customers. Amazon's potential investment could give the e-commerce group a seat at the table to push for more favourable terms, or broader access itself.

Either way, the dual hedge reflects how AI’s centre of gravity is shifting. The real power no longer lies with the model-makers, but with those who control the infrastructure those models run on. In that context, Amazon just staked its claim.

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CONTEXT NEWS

Amazon.com is in talks to invest in ChatGPT-maker OpenAI in a potential deal that could value the artificial intelligence firm at more than $500 billion, Reuters reported on December 16, citing a source familiar with the matter.

Amazon may invest about $10 billion in OpenAI, but the talks between the two firms are "very fluid", the source told Reuters on condition of anonymity because the matter is private.

The Information, which first reported the talks, said OpenAI plans to use Amazon's Trainium chips, which compete with Nvidia and Google's chips, and added that Amazon's financing could lead to a broader fundraising round with other investors.

OpenAI is also looking to sell an enterprise version of ChatGPT to Amazon, but it is unclear whether the deal includes provisions for integrating ChatGPT features such as shopping features that Amazon is developing for its own apps, the report said.

(Editing by George Hay; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))