OpenAI and Amazon are closing in on a $10 billion funding deal

Reuters, citing an unnamed source familiar with the matter, reports that the funding deal is not yet finalized and discussions remain fluid, but that it would value OpenAI at about $500 billion.

OpenAI completed a restructuring in October that was designed to give it more freedom to pursue deals like this to raise capital. Against a backdrop of growing fears that valuations in the AI sector are overheating, OpenAI has forged ahead with a series of deals since then, including a $1 billion injection from Disney $DIS along with a licensing agreement allowing the use of its characters on OpenAI’s video app Sora.

The Amazon deal would also reportedly see OpenAI granted the ability to use Amazon's Trainium chip, which would mark a major win for the tech giant's semiconductor business. Nvidia $NVDA still dominates the AI chip market, but companies such as Meta $META and Amazon are gaining traction with rival offerings.

It would be the second major agreement between the two companies in recent months. In November, OpenAI agreed to buy $38 billion worth of capacity from Amazon Web Services, which chief executive Sam Altman said would help it expand towards the “massive, reliable compute” needed to scale the company.

OpenAI has made more than $1.4 trillion of infrastructure commitments in the last few months, including with chipmakers Nvidia, Advanced Micro Devices and Broadcom $AVGO. The scale and circular nature of those deals has heightened fears that the AI industry could be operating in an investment bubble. 

Those concerns were renewed last week when Oracle $ORCL's stock fell by as much as 16% following the release of its earnings report, which showed its AI spending far outpacing returns. It shaved as much as $70 billion off the company's valuation.