CNBC's MacKenzie Sigalos joins 'Money Movers' to discuss the OpenAI and Amazon deal valued at more than $10 billion.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Amazon is reportedly in discussions to invest at least $10 billion in OpenAI, with the potential deal positioning OpenAI as a flagship customer for Amazon Web Services' Tranium chips. This move would not only surpass Amazon's previous investments in AI startups but also signal a shift in OpenAI's chip strategy, as it has previously relied exclusively on NVIDIA hardware.

The negotiations come after OpenAI's corporate restructuring, which has allowed it to pursue new partnerships beyond its existing relationship with Microsoft. The adoption of Tranium chips could offer significant cost savings for OpenAI, and the deal highlights intensifying competition among major tech companies to secure AI leadership through strategic investments and chip development.

Amazon and OpenAI in talks for $10B investment deal

Speaking of A.I. today, a possible deal between Open A.I. and Amazon might be valued north of $10 billion. For that, we'll turn to Mackenzie Sagalos. Morning, Mack. Hey, good morning, Carl. This would be a big upgrade in the Amazon Open A.I. relationship. We're talking about both a huge investment plus a path for AWS to land Open A.I. as a flagship Tranium customer, which is a real optics win for Amazon's NVIDIA alternative. Now, as for what I'm hearing from a source close to the discussions, Amazon is looking at an equity stake of at least $10 billion in Open A.I., though the specifics are still fluid and not finalized. That would exceed the amount of capital Amazon has committed to Anthropic. This would also put Open A.I.'s valuation somewhere above $500 billion and below a trillion. But really, the bigger signal here is what it says about Open A.I.'s new freedom to partner across the ecosystem after its corporate restructure and a reset of key commercial terms with Microsoft. Now, those same discussions with Amazon include Open A.I. potentially using their Tranium chips, which is a big win for AWS as it tries to build a real market for its in-house silicon that still has something to prove on performance. AWS just rolled out two new Tranium generations, pitching them as a cheaper option for A.I. workloads. And if that piece comes together, it turns this investment into a chips for equity story. Open A.I. just last month signed a $38 billion deal with AWS Cloud with room to expand. And Open A.I. is looking for places to shave costs as its compute bill balloons. So Tranium undercutting NVIDIA on price is a major incentive here. This is also the big tech proxy war playing out in real time. Microsoft and Google have been getting closer to Anthropic. And now Amazon is leaning harder into Open A.I. guys. I guess on the on the chip dominance, does it affect NVIDIA in terms of market shares? Just there's enough to go around here. Well, what's fascinating is up until this point, Open A.I. has exclusively used NVIDIA models, whether it was using them through a relationship with Google Cloud or even the Amazon deal that it struck last month. So this is a very notable departure from their, you know, from their strategy to this point. They're going to be using Tranium potentially for the first time. And that's in part because they undercut NVIDIA's models by up to 40 percent. That's something that Amazon CEO Andy Jassy has been very vocal about in terms of talking about their, you know, competitive advantage against rivals. You've also seen Open A.I. lean into relationships with AMD to use their Instinct series over multiple generations. And then that $10 billion deal with Broadcom to build its own chips really taking, you know, taking a page out of the Google playbook to own that entire vertical stack. It is interesting. For so long, I feel like we kept saying one man's margin is another man's opportunity. When would they start to chip away at the NVIDIA model? And then you look back and in a very short period of time, Google TPUs, AMD, to your point, and now Amazon. And you said there it happened. And that's the thing that I'm looking out for, because Open A.I. also has this relationship with Google Cloud that they struck this spring. And Google's in-house silicon, the TPU, has a fantastic reputation on the street in terms of these in-house silicon programs. And so I would expect that if Open A.I. is looking to save on cost, they've committed $1.4 trillion to compute. The best way to save money is through chip strategy. So that would be the next thing that I'm waiting for, whether or not Open A.I. decides to use TPUs as part of that Google Cloud arrangement. Mac, thank you.

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Ukraine Invasion

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Moscow

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Caracas

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Council of the City of Sydney

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Amazon and OpenAI in talks for $10B investment deal

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