Amazon Set to Waste $10 Billion on OpenAI

By Douglas A. McIntyre Published Dec 17, 9:15AM EST

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Amazon.com Inc. (NASDAQ: AMZN) reportedly plans to invest $10 billion into OpenAI, a firm swarmed by competition.
Clearly, Amazon is trying to buy its way into the AI market when the bubble may be about to burst.

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Amazon Set to Waste $10 Billion on OpenAI — © megaflopp / Shutterstock.com

Amazon.com Inc. (NASDAQ: AMZN | AMZN Price Prediction) apparently cannot help itself. Media reports say it plans to invest $10 billion into OpenAI.

OpenAI, which until recently has been the leading artificial intelligence (AI) company in the world, has raised money from a long list of investors. Some are venture capitalists who are simply writing checks to get returns. However, another list consists of money or strategic deals with Microsoft, Oracle, Softbank, Nvidia, and, soon, Disney.

What these tech investors are getting is a stake in a company that has had its spot at the top of the industry challenged by Gemini 3. That is an Alphabet Inc. (NASDAQ: GOOGL) offering. It is also one that the company says will not make money until 2030, one that will need hundreds of billions of dollars to hit its ambiguous goals, and one that has a growing number of direct competitors. These competitors include divisions of public companies, well-funded xAI and Anthropic, and a legion of smaller companies.

Bloomberg reports, “OpenAI is in initial discussions to raise at least $10 billion from Amazon.com Inc. and use its chips, a potential win for the online retailer’s effort to broaden its AI industry presence and compete with Nvidia Corp.” Amazon is a tiny player in the AI chip business. Nvidia Corp. (NASDAQ: NVDA) dominates, with a market cap of $4.33 trillion, which makes it the most valuable company in the world. Put plainly, the Amazon deal is part of the dangerous “round tripping” that goes on in the industry. One company invests in another. The company that gets the investment uses the money to buy products or services from the investor.

Amazon clearly has little chance of competing head-to-head with Nvidia, so it is buying its way into the market. And Amazon can hardly say it is getting special treatment from OpenAI. The Financial Times reports, “OpenAI has already locked in $1.5tn in long-term deals with Nvidia, Oracle, AMD and Broadcom to supply chips and other computing infrastructure.”

OpenAI does have one important strategic advantage in an Amazon deal. Like the rest of the AI world, it does not want to be trapped in a world where Nvidia is the only arms supplier.

People have begun to ask whether the AI industry has created a valuation bubble. They are worried that the companies leading the race into AI will never make money. Many AI products are currently free. Investors worry that the data centers needed to run AI will take years to build and may not have enough electricity to run them. Still others believe that not all the large AI companies can survive in a brutally competitive market. The total of these investments will eventually move into the trillions of dollars.

The Amazon deal with OpenAI is another example that the train has run off the rails.

Amazon Stock Price Prediction and Forecast 2025–2030

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.