Amazon.com Inc. (NASDAQ: AMZN) apparently cannot help itself. Media reports say it plans to invest $10 billion into OpenAI.
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Amazon.com Inc. (NASDAQ: AMZN) reportedly plans to invest $10 billion into OpenAI, a firm swarmed by competition.
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Clearly, Amazon is trying to buy its way into the AI market when the bubble may be about to burst.
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OpenAI, which until recently has been the leading artificial intelligence (AI) company in the world, has raised money from a long list of investors. Some are venture capitalists who are simply writing checks to get returns. However, another list consists of money or strategic deals with Microsoft, Oracle, Softbank, Nvidia, and, soon, Disney.
What these tech investors are getting is a stake in a company that has had its spot at the top of the industry challenged by Gemini 3. That is an Alphabet Inc. (NASDAQ: GOOGL) offering. It is also one that the company says will not make money until 2030, one that will need hundreds of billions of dollars to hit its ambiguous goals, and one that has a growing number of direct competitors. These competitors include divisions of public companies, well-funded xAI and Anthropic, and a legion of smaller companies.
Bloomberg reports, “OpenAI is in initial discussions to raise at least $10 billion from Amazon.com Inc. and use its chips, a potential win for the online retailer’s effort to broaden its AI industry presence and compete with Nvidia Corp.” Amazon is a tiny player in the AI chip business. Nvidia Corp. (NASDAQ: NVDA) dominates, with a market cap of $4.33 trillion, which makes it the most valuable company in the world. Put plainly, the Amazon deal is part of the dangerous “round tripping” that goes on in the industry. One company invests in another. The company that gets the investment uses the money to buy products or services from the investor.
Amazon clearly has little chance of competing head-to-head with Nvidia, so it is buying its way into the market. And Amazon can hardly say it is getting special treatment from OpenAI. The Financial Times reports, “OpenAI has already locked in $1.5tn in long-term deals with Nvidia, Oracle, AMD and Broadcom to supply chips and other computing infrastructure.”
OpenAI does have one important strategic advantage in an Amazon deal. Like the rest of the AI world, it does not want to be trapped in a world where Nvidia is the only arms supplier.
