Fifty billion dollars. That is the amount Amazon plans to invest in OpenAI. But as soon became clear, the whole matter is not as straightforward as it first appears.
According to a report by The Information, Amazon would pay only $15 billion upfront. The remaining $35 billion depends on meeting one of two conditions: either OpenAI goes public through an IPO (initial public offering), or it reaches a predefined milestone in artificial general intelligence, or AGI. Negotiations are still ongoing, and the final terms have not yet been agreed.
What exactly is AGI?
For many people, AGI, or artificial general intelligence, is still more science fiction than reality. It is a hypothetical system capable of performing any intellectual task as well as, or better than, a human. OpenAI describes achieving AGI as its main goal. But when exactly will that happen? And who will decide that it has?
This is where the heart of the story lies. A condition tied to an AGI milestone is highly unusual. Investors typically tie funding to specific financial results, not technological breakthroughs whose definition is vague, to say the least. Amazon is signaling that it takes the future of AI extremely seriously, while also leaving itself a way out.
Who else is betting on OpenAI?
Amazon is not alone in this race. According to the same report, SoftBank and Nvidia each plan to invest $30 billion, in three installments spread throughout the year. The total size of the ongoing funding round could therefore exceed $100 billion. That is a figure unprecedented in the history of the technology industry.
OpenAI desperately needs this money. The company is burning through enormous amounts of cash to operate data centers and develop new models. Without a massive influx of capital, it would be unable to maintain its pace of growth.
If Amazon's investment were fully realized, it would become the largest contributor to this funding round, surpassing even OpenAI's key partner to date, Microsoft. That would be a remarkable turn of events, as Microsoft has poured more than $13 billion into OpenAI and has long been regarded as its closest ally.
Why does Amazon want to invest in OpenAI at all?
Amazon has its own AI research and its own models. So why pay a competitor? The answer is pragmatic. OpenAI powers ChatGPT, the world's most widely used AI tool. Whoever hosts its infrastructure and supplies the computing power will profit regardless of who ultimately "wins" the race to build the best model.
Amazon Web Services (AWS), Amazon's cloud division, is one of the largest providers of server capacity for AI companies. A closer partnership with OpenAI would bring a direct influx of business. Business is business, even when it presents itself as a technological vision.
Reuters notes that OpenAI is preparing for an IPO that could value the company at approximately one trillion dollars. If successful, Amazon's conditional investment would be automatically released, and Amazon would be sitting on an enormous profit.
