Amazon signs a $38 billion deal with OpenAI!

Amazon (AMZN) shares gained about 5% on Monday morning after the company announced a $38 billion deal with OpenAI (OPAI.PVT). Through this agreement, OpenAI will gain access to tens of thousands of artificial intelligence chips produced by Nvidia (NVDA) via Amazon's cloud computing infrastructure.

As part of the partnership, OpenAI will run AI workloads on Nvidia GPUs (graphics processing units) hosted on Amazon's AI servers. The companies stated that OpenAI will immediately start utilizing the AI infrastructure provided by Amazon Web Services to reach the full computing capacity specified in the agreement by the end of 2026.

This step is recorded as the latest in a series of agreements OpenAI has made with cloud providers and chip manufacturers. OpenAI also has agreements of $300 billion with Oracle (ORCL) and agreements worth over $22 billion with CoreWeave (CRWV). Recently, OpenAI has also signed agreements with Broadcom (AVGO), AMD (AMD), and Nvidia (NVDA).

Cyclical AI agreements are raising fears of a bubble forming in the market, along with concerns that the demand for AI may be exaggerated. OpenAI's costs are expected to exceed $1 trillion by 2030, while its revenues are likely to remain significantly below that figure, raising questions about whether the company can meet its latest AI infrastructure commitments.

On the other hand, OpenAI announced a new agreement last week with Microsoft (MSFT) that allows it to become a non-profit public benefit organization. This development paves the way for the ChatGPT creator to go public. According to a Reuters report, the company is preparing for an initial public offering valued at $1 trillion.

Amazon reported its third-quarter earnings last week, exceeding analyst expectations and pushing its shares to an all-time high, while AWS announced last Wednesday that it had completed a major AI data center project and is ready to supply one million dedicated AI chips to Anthropic, a competitor of OpenAI, by 2025.