OpenAI Signs Major Deal With AWS Just Weeks After Massive Outage

Amazon has just inked a massive deal with OpenAI worth $38 billion dollars. As part of the multi-year deal, the ChatGPT-maker will rely on the Amazon Web Services (AWS) cloud infrastructure to host and train its AI models. The deal is a pretty interesting shift for a few reasons. Recently, a massive AWS outage brought the internet to its knees, affecting everything from social media and payment software to gaming services and food delivery services across continents. Even smart beds were not spared the AWS snag. Aside from the inconveniences caused by the disruption, it was a stark reminder of how a huge chunk of the internet is buttressed by one major corporation and how such a widespread outage can dent Amazon's reputation in a cutthroat market.

"Scaling frontier AI requires massive, reliable compute," OpenAI chief, Sam Altman, said in a press statement. It seems Amazon's sheer dominance in the cloud segment leaves clients with no other choice, and more importantly, such occasional operational "blips" take a backseat when it comes to AI ambitions. Amazon says OpenAI will leverage its vast infrastructure of compute clusters, which includes cutting-edge Nvidia GB200s and GB300s GPUs, for training next-gen AI models and offering inference space for ChatGPT. 

The seeds of this impending partnership were sown a few months ago. Soon after OpenAI released its first open-weight AI models, the gpt-oss-120b and gpt-oss-20b, Amazon announced that it would offer them via its Bedrock and Amazon SageMaker AI platforms. So far, Microsoft has remained OpenAI's primary cloud infrastructure provider with its Azure service. For OpenAI investors, this deal could be bittersweet. On one hand, it's burning through cash at record pace, while Altman's profit predictions are also getting bolder than ever.

Microsoft has poured billions of dollars into OpenAI, and following its restructuring a few days ago, it was revealed that Microsoft held a meaty 27% stake in the company valued at approximately $135 billion. More importantly, as OpenAI turned into a public benefit corporation (PBC), it committed to a massive $250 billion deal to make Microsoft's Azure services. This is also where the situation gets a tad tricky. OpenAI can now host and offer non-API products on any cloud service of its choice. That means OpenAI's foundation tech, such as GPT model APIs, will remain tied to Microsoft's Azure cloud service, but anything else is kosher. This is where open weight models, which are now offered via AWS cloud, come into the picture. OpenAI can now develop and offer them via competitor cloud platforms, and it is no longer tied to Microsoft's services.

In hindsight, this is a huge validation for Amazon's cloud service despite widespread outage flubs, especially in the context of the AI race. Google and Microsoft are the biggest cloud service providers, and both of them are also at the forefront of AI development. Amazon isn't quite seen in the same vein. But now that a leading player like OpenAI is splurging billions of dollars into Amazon's cloud infrastructure, Amazon's reputation as a top-tier cloud service provider will only skyrocket. The latest OpenAI deal is also pretty interesting because Amazon and Google are both multi-billion dollar backers in Anthropic, an AI company whose Claude series of AI models rival ChatGPT. Additionally, Microsoft has also inked deals with Anthropic to integrate Claude within products such as 365 Copilot. So far, Microsoft has heavily leveraged OpenAI's GPT models for its Copilot AI, and it's also pushing in-house models within the broad Windows ecosystem.