why Amazon does not involve circular AI deal like Microsoft and Nvidia

 why Amazon does not involve circular AI deal like Microsoft and Nvidia

Amazon is involved in "circular" AI deals, much like its competitors Microsoft and Nvidia. The idea that it is not is a misconception

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Amazon's Approach to Circular AI Deals

Amazon, Microsoft, and Nvidia are all engaged in a web of interconnected investments and agreements within the AI industry, which critics often label as "circular deals". These arrangements essentially involve: 

• Investments tied to cloud usage: Amazon has reportedly been in talks to invest over $10 billion in OpenAI, following a separate $38 billion commitment from OpenAI to use Amazon Web Services (AWS) capacity over several years. OpenAI would effectively use the investment money to pay for the cloud services.
• Strategic Rationale: Companies utilize this model because training modern AI models requires massive capital and infrastructure that traditional revenue streams cannot yet fully support. By investing in an AI startup, the cloud provider or chipmaker secures a guaranteed, large-scale customer for its infrastructure. 

Key Differences in Strategy

While Amazon participates in these deals, its overall strategy differs slightly from Microsoft's and Nvidia's primary approaches. 

• Vertical Integration: Amazon's primary focus is on deep vertical integration, from designing its own custom AI chips (Trainium and Inferentia) to providing a comprehensive suite of cloud services through AWS. The goal is to reduce reliance on expensive Nvidia GPUs and offer a cost-effective alternative for its vast enterprise customer base.
• Diverse Partnerships: Unlike Microsoft, which holds exclusive rights to some of OpenAI's most advanced models, Amazon has pursued a more diversified approach. It is a major investor in OpenAI rival Anthropic, committing at least $8 billion to the startup, a deal which contractually requires Anthropic to use AWS's custom chips and services.
• Hardware Optionality: Amazon supports both Nvidia GPUs (as seen in its multi-billion dollar deal to provide access to Nvidia hardware through AWS) and its own custom silicon, allowing it to win regardless of which hardware architecture dominates. 

In essence, Amazon is actively involved in the same type of "circular" financial arrangements as its competitors to secure its place in the AI race, but it is also leveraging its unique position as the leading cloud provider and a developer of in-house hardware to control more of the AI value chain and ensure long-term profitability.