$38 Billion Deal Between Amazon and OpenAI!

Amazon (AMZN) shares gained about 5% on Monday morning after the company announced a $38 billion deal with OpenAI (OPAI.PVT). With this agreement, OpenAI will gain access to tens of thousands of artificial intelligence chips produced by Nvidia (NVDA) through 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 begin utilizing the AI infrastructure provided by Amazon Web Services immediately to reach the full computing capacity specified in the agreement by the end of 2026.

This move marks the latest in OpenAI's agreements with cloud providers and chip manufacturers. OpenAI also has agreements worth $300 billion with Oracle (ORCL) and deals worth over $22 billion with CoreWeave (CRWV). Recently, OpenAI signed agreements with Broadcom (AVGO), AMD (AMD), and Nvidia (NVDA).

Circular AI agreements are raising concerns about a potential bubble in the market, as well as worries that the demand for AI may be exaggerated. OpenAI's costs are expected to exceed $1 trillion by 2030, while its revenues are predicted to fall significantly short of that figure, raising questions about the company's ability to meet its latest AI infrastructure commitments.

On the other hand, OpenAI announced last week a new agreement with Microsoft (MSFT) that allows the organization to transform into a non-profit public benefit entity. This situation opens the path for the ChatGPT creator to go public. According to a report by Reuters, the company is said to be preparing for an initial public offering valued at $1 trillion.

Amazon reported its third-quarter earnings last week, surpassing analysts' 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 prepared to provide one million dedicated AI chips for OpenAI's competitor Anthropic by 2025.