Introduction

Amazon is reportedly in preliminary discussions to invest at least $10 billion in OpenAI, a deal that could value the AI giant at over $500 billion. The investment is contingent on OpenAI adopting Amazon’s proprietary Trainium AI chips, signaling a major shift in the AI hardware landscape currently dominated by Nvidia. This potential partnership follows OpenAI’s recent move to diversify its cloud providers beyond Microsoft.

Context: The deal exemplifies the growing trend of “circular investments” where big tech firms invest cash into AI startups, which is then recycled back into cloud service contracts.

The Deal: $10 Billion for Chips and Credits

According to reports from The Information and Bloomberg on December 17, 2025, the negotiations involve Amazon injecting capital directly into OpenAI. In return, OpenAI would commit to using AWS infrastructure, specifically Amazon’s custom silicon, Trainium, for training and inference workloads.

  • Valuation Impact: The deal positions OpenAI’s valuation north of $500 billion.
  • Infrastructure Shift: While OpenAI has historically relied on Nvidia GPUs via Microsoft Azure, this deal would validate Amazon’s custom chips as a viable alternative for frontier model training.
  • Precursor: This follows a confirmed $38 billion cloud compute agreement signed between AWS and OpenAI in November 2025.

Why it matters: This validates Amazon’s years-long investment in custom silicon (Trainium/Inferentia) and challenges Nvidia’s near-monopoly on high-end AI compute.

Strategic Implications: Beyond Microsoft

OpenAI’s relationship with Microsoft has evolved from exclusivity to an “open” marriage. In October 2025, the two companies restructured their partnership, removing the clause that required OpenAI to use Azure exclusively.

Diversification Strategy

  • OpenAI: Desperately needs compute capacity. By partnering with Amazon (and previously Broadcom/Oracle), OpenAI reduces its dependency on a single supply chain (Microsoft/Nvidia).
  • Amazon: Despite its $8 billion backing of Anthropic (OpenAI’s rival), Amazon cannot afford to miss out on hosting the workloads of the world’s leading AI model.

Why it matters: It marks the end of the “proxy war” era where Amazon backed Anthropic and Microsoft backed OpenAI. Now, cloud providers are becoming “arms dealers” serving all major AI labs to maximize infrastructure revenue.

The “Circular Deal” Controversy

This transaction highlights the controversial “circular” nature of modern AI funding.

  1. Investment: Amazon invests $10 billion in OpenAI.
  2. Revenue Booking: OpenAI pays AWS for cloud credits using that capital.
  3. Result: Amazon records the investment as a strategic asset while boosting its AWS revenue growth figures simultaneously.

While financially efficient, this structure has drawn scrutiny from investors and regulators who worry it inflates revenue numbers without generating net-new external cash flow.

Conclusion

  • Validation for AWS Silicon: OpenAI’s usage of Trainium is a massive endorsement for Amazon’s chip capabilities.
  • OpenAI’s Independence: The company is successfully executing a multi-cloud strategy, playing Big Tech giants against each other for better terms.
  • Regulatory Watch: The sheer scale ($500B valuation) and circular nature of the deal will likely attract intense antitrust review.

Summary

  • Amazon is discussing a $10 billion investment in OpenAI.
  • The deal requires OpenAI to use Amazon’s Trainium chips, challenging Nvidia.
  • This follows OpenAI’s break from Microsoft exclusivity in late 2025.
  • The structure is a “circular deal,” recycling investment cash into cloud revenue.

#Amazon #OpenAI #Trainium #AWS #AIInvestment #CloudComputing #Nvidia #GenerativeAI

References