Amazon in Talks Over $10 Billion OpenAI Move: Report. That’s Bad for Nvidia, Broadcom.

Amazon has said its Trainium chips can offer a 50% reduction in the cost of AI training compared with rival graphics-processing units. (Ina Fassbender/AFP via Getty Images)

Key Points

• Amazon is reportedly discussing a $10 billion investment in OpenAI, potentially contingent on OpenAI using Amazon’s Trainium chips.
• This partnership could negatively impact chip makers Nvidia and Broadcom by reducing OpenAI’s reliance on their hardware.
• Amazon’s Trainium 3 chips offer over four times the computing performance of the previous generation, with UltraServers now available.

Amazon.com is discussing a potential investment in ChatGPT-developer OpenAI worth around $10 billion, news outlets reported.

The partnership could have negative implications for chip makers Nvidia and Broadcom.

The investment would be tied to OpenAI’s use of Amazon’s in-house Trainium chips, according to technology-focused The Information, which was early to report the move.

Amazon and OpenAI didn’t immediately respond to Barron’s requests for comment Wednesday. On Wednesday, Amazon shares were up 0.2%.

OpenAI and Amazon are already partners. They reached a $38 billion agreement for Amazon Web Services to provide infrastructure for AI workloads in November. That deal calls for Nvidia chips rather than Amazon’s Trainium processors.

Trainium chips are important for Amazon so it doesn’t become dependent on costly hardware from Nvidia.

In early December, Amazon said “UltraServers” powered by up to 144 of its in-house Trainium 3 chips are now available. The servers offer more than four times the computing performance than the previous generation.

Amazon has declined to provide Barron’s with direct benchmark comparisons for the Trainium 3 servers against the latest hardware from Nvidia and Google, or their power requirements.

The company has said, however, that Trainium chips can reduce the cost of training and operating AI models by up to 50% compared to systems that use equivalent graphics processing units.

Still, there have been questions about how many external customers are prepared to use the Trainium hardware.

Getting OpenAI, one of the biggest spenders in the AI hardware sector, on board would be a coup for Amazon—even at the cost of a $10 billion investment, which is set to value OpenAI at more than $500 billion, according to reports.

Such a deal would arguably reduce the scope for OpenAI’s spending on chips from Nvidia, as well as the Tensor Processing Units jointly developed by Broadcom and Google.

However, more purchases of Trainium hardware could be good for custom-chip designer Marvell Technology, which has worked on previous generations of the processors. Marvell shares were up 0.8%.

Corrections & Amplifications: Amazon.com is discussing a potential investment in ChatGPT-developer OpenAI worth around $10 billion, according to multiple reports. A previous headline incorrectly said $10.

Write to Adam Clark at adam.clark@barrons.com