Amazon, OpenAI forge multi-faceted partnership: Dissecting the deal

Amazon and OpenAI expanded a partnership and the initial headlines will revolve around the $110 billion raised to give the LLM giant a $730 billion valuation. However, the Amazon investment and distribution pact for the OpenAI Frontier platform and a Stateful Runtime Environment powered by OpenAI models on AWS are the most notable.

First, let's get the topline out of the way. OpenAI announced an $110 billion round that includes $30 billion each from SoftBank and Nvidia and $50 billion from Amazon. The footnotes are that the total includes installments based on milestones. For instance, Amazon is putting $15 billion into OpenAI upfront with $35 billion later as goals are met.

The most interesting part of the OpenAI barrage of news is the Amazon partnership, which raises a key question: Is it about the model distribution or the runtime?

Given Anthropic has been running circles around OpenAI of late with Claude Cowork and various plugins to enterprise systems, OpenAI needed some real distribution. OpenAI models primarily are distributed through Microsoft Azure. Anthropic has all three hyperscalers offering models.

Without Amazon, OpenAI's Frontier platform, which builds, deploys and manages coworkers, could be hampered. With that backdrop, let's look at the Amazon-OpenAI deal.

AWS and OpenAI will team up on a Stateful Runtime Environment powered by OpenAI models. This runtime will be available on Amazon Bedrock so AWS customers can scale AI apps and agents. Separately, OpenAI and Microsoft posted a statement noting that their partnership remains intact and stateless APIs to OpenAI models are exclusive to Azure.

According to Amazon and OpenAI, stateful developer environments are an evolution in how frontier models will be used. The models will tap into compute, memory and identity and work across systems and data sources. The companies said Stateful Runtime Environment will be trained and optimized for AWS infrastructure and integrated into Amazon Bedrock AgentCore.

AWS will be the exclusive third-party cloud distribution for OpenAI Frontier. AWS will give Frontier a lot of distribution since the company is the top cloud provider. AWS gets OpenAI's best platform as an exclusive.

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OpenAI will consume 2 gigawatts of Trainium capacity through AWS infrastructure to support the Stateful Runtime Environment and Frontier. AWS' investment in OpenAI may be covered in Trainium consumption. By extending a previous partnership, OpenAI can stretch out credits.

The companies expanded an initial $38 billion agreement by $100 billion over eight years. AWS said OpenAI's commitment covers both Trainium3 and Trainium4 chips. OpenAI with Anthropic guarantee that AWS will have more demand for its custom silicon.

OpenAI and Amazon will develop customized models for Amazon's customer-facing apps. This move is necessary for OpenAI to at least slow down Anthropic's momentum. What's notable here is that Amazon teams will tailor OpenAI models for Amazon products and agents. We'll never know how OpenAI's models will fare against Anthropic and Amazon's Nova family in terms of cost and performance, but I'd love to be a fly on the wall.

• LLM giants need to build apps, ecosystems to go with the models

Here's Constellation Research analyst Holger Mueller's point of view on the deal.

"This is an important win for enterprises who are using AWS. With AWS being the Frontier partner, it will get cutting edge OpenAI capabilities for their business data. Both vendors expect significant demand and that explains the runtime capacity expansion with the Trainium commitments. And AWS caters to its large developer base with a stateful developer environment. That environment is what is needed in the AI powered coding area and will create substantial stickiness for AWS. The only downside is some developers wanted that stateful runtime with the other Amazon partner - Anthropic with Claude. You can expect a similar deal with Anthropic in the near future."

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