OpenAI Secures $110 Billion Funding, What Makes Amazon Spend 50 Billion?

TradingKey - On Friday, February 27 local time, AI research firm OpenAI officially announced the completion of a massive $110 billion funding round.

According to OpenAI's announcement, this round of financing involved participation from Amazon ( AMZN ), NVIDIA ( NVDA ), and SoftBank, with Amazon injecting $50 billion as a new investor, and existing shareholders NVIDIA and SoftBank each adding $30 billion.

Following this round, OpenAI's pre-money valuation jumped to $730 billion, a significant increase from the $500 billion valuation during its secondary funding round last October, placing it among the world's top private companies alongside SpaceX and ByteDance.

Notably, Amazon's $50 billion investment will not be disbursed all at once; the initial phase consists of $15 billion, with the remaining $35 billion to be injected in installments based on specific conditions such as OpenAI's IPO progress and the achievement of Artificial General Intelligence (AGI) milestones.

Coinciding with this financing is a multi-year deep strategic partnership between OpenAI and Amazon. OpenAI stated it has expanded its previous $38 billion partnership with Amazon AWS into a total of $100 billion over the next eight years.

Under the agreement, OpenAI will increase its use of AWS infrastructure, including the deployment of 2 gigawatts of Amazon's Trainium AI chips for its newly launched enterprise platform, Frontier.

Amazon CEO Andy Jassy said on Friday that both major AI labs are now investing heavily in Trainium.

Beyond computing power collaboration, AWS will also become the exclusive third-party cloud distributor for Frontier, OpenAI's enterprise platform.

Simultaneously, the two parties will jointly develop a stateful runtime environment adapted for enterprise-level AI applications and create customized models to provide technical support for Amazon's consumer products.

This partnership marks a major shift in Amazon's AI strategy—previously, Amazon had maintained a close partnership with Anthropic, OpenAI's core competitor.

Amazon's AI Push Accelerates Again

As early as 2023, Amazon began its deep layout in the AI field, not only injecting billions of dollars into Anthropic but also spending $11 billion in Indiana to build a dedicated data center campus for it, known as Project Rainier.

Currently, several of Amazon's AI products, such as the shopping assistant Rufus and the upgraded version of the digital assistant Alexa+, rely on Anthropic's Claude models.

Although Amazon just reached a blockbuster partnership with OpenAI, Amazon CEO Andy Jassy explicitly stated in an interview on Friday that this would not affect its relationship with Anthropic. He emphasized that Anthropic itself has multiple partners, as does Amazon, and that their cooperation will continue to move forward steadily, while Amazon looks forward to a long-term partnership with OpenAI.

For AWS, this partnership is a key breakthrough—AWS is currently in fierce competition with giants such as Microsoft ( MSFT ), Google ( GOOGL ), and Oracle ( ORCL) and other giants for high-margin AI cloud service contracts, and joining forces with OpenAI could significantly enhance its market competitiveness.

At the same time, this provides reassurance for Wall Street. Previously, the market was concerned about Amazon's $200 billion capital expenditure plan for this year; now, this partnership makes the purpose of such massive spending clearer, with the majority of funds directed toward AI-related data centers, chips, and network equipment.

Barton Crockett of Rosenblatt Securities stated bluntly that the partnership with OpenAI is vital to Amazon's competitiveness.

Analysts at William Blair noted in a report that AWS establishing partnerships with both OpenAI and Anthropic—the two leading AI labs—with both using AWS's custom chips, continues to dismantle bearish views and implies that AWS's pace of expansion will accelerate, providing a clearer roadmap for the $200 billion capital expenditure plan.

Andrew Graham, managing partner at Jackson Square Capital, believes that AWS's partnership with OpenAI via Trainium chips signifies that Amazon has become a major player in the custom chip space, competing directly with Broadcom ( AVGO) and Google, and could even shake NVIDIA's chip dominance.

In fact, Amazon was once in catch-up mode in the AI consumer application market, where Google and OpenAI seized the initiative early on.

To reverse this, Amazon launched its self-developed foundation model, Nova, in December 2024 and reorganized its AGI department at the end of the year. Senior cloud executive Peter DeSantis took the helm from Rohit Prasad, and departments such as chip manufacturing and quantum computing were brought under his management; this department is the R&D core of the Nova model.

The partnership with OpenAI undoubtedly hits the accelerator for Amazon's AI development, especially in the new frontier of AI applications: smart commerce.

Previously, Walmart ( WMT ), Etsy ( ETSY ), Shopify ( SHOP) and other platforms have already reached shopping-related partnerships with AI firms like OpenAI, while Amazon has remained on the sidelines, even once banning dozens of intelligent agents including ChatGPT from accessing its platform in favor of promoting its own Rufus.

However, in recent months, Jassy has signaled several times that Amazon is considering opening access to third-party intelligent agents or conducting tool integration with AI companies. He stated in a recent earnings call that Amazon is actively pursuing relevant dialogues and is confident in creating an AI application experience that is a win-win for both users and businesses.

OpenAI Joins the IPO Race

OpenAI CEO Sam Altman stated that the company will push for a listing at the appropriate time. Currently, the AI industry is experiencing a race for financing and IPOs, with companies intensively raising funds to support the massive costs of AI research and development.

Just this month, OpenAI's core competitor Anthropic completed a $30 billion funding round, with its valuation jumping to $380 billion. Furthermore, Anthropic invited former General Motors executive Chris Liddell to join its board, a move widely interpreted by the market as a signal of an accelerated path to an IPO.

Meanwhile, Elon Musk's xAI also completed a merger with SpaceX this month, with the combined entity valued at $250 billion. xAI recently completed its own $20 billion funding round. Musk is pushing hard for SpaceX's listing plan, attempting to reach capital markets ahead of OpenAI and Anthropic.

OpenAI's financing pace has not slowed either, as Altman is in talks with several sovereign wealth funds in the Middle East for new investments; the UAE's MGX Investment Co. has previously injected capital into OpenAI.

In the more than six years since transitioning from a non-profit lab to a commercial company, OpenAI has yet to achieve profitability, as expenditures for computing costs and talent compensation remain high.

According to the company's plans, revenue is expected to reach $13 billion in 2025, but total expenditures over the next four years will be as high as $115 billion. OpenAI hopes to complete an IPO within the next few years, but before that, it must improve its financial situation to attract the attention of Wall Street investors.

As the developer of ChatGPT, OpenAI faces intense competition from AI startups like Anthropic and tech giants like Google, yet its user base continues to show strong growth.

As of now, weekly active users have surpassed 900 million, with paid users exceeding 50 million. In terms of revenue structure, approximately 60% of OpenAI's revenue came from consumer products at the end of last year, while 40% was derived from enterprise business; the company plans to increase the proportion of enterprise revenue over the coming year.