Amazon (AMZN) stock rallied to record highs on Monday, after announcing a $38 billion cloud deal with ChatGPT creator OpenAI. It is Amazon Web Services’ first cloud contract with OpenAI, which has long been a key partner for Amazon rival Microsoft (MSFT).
Amazon announced the “multiyear, strategic partnership” with OpenAI is a news release, which AWS said will allow OpenAI to access “hundreds of thousands” of Nvidia‘s (NVDA) top computing chips. The deal is for seven years, with most capacity expected to be in place by the end of 2026 and the “ability to expand” into 2027.
The OpenAI partnership follows a strong third-quarter earnings report on Thursday, which boosted Amazon shares nearly 10% in Friday trading. Amazon posted its best cloud growth since 2022, answering some investor concern that AWS was falling behind Microsoft and Google parent Alphabet (GOOGL) as a destination for AI-related cloud computing.
Meanwhile, OpenAI last week completed a restructuring to become a public benefit corporation. The move gave Microsoft a 27% stake in OpenAI, accounting for its earlier investors in the startup. OpenAI also signed a deal to purchase an incremental $250 billion of Azure cloud computing service. But the deal also included the note that Microsoft no longer hold right of first refusal on OpenAI’s cloud computing contracts.
Microsoft had already stopped being OpenAI exclusive cloud computing provider earlier this year. OpenAI also agreed to spend more than $300 billion on cloud computing services with Oracle in September.
On the stock market today, Amazon stock rose 5% to 256.29.
That marks another record high. Shares broke out Friday above a 238.85 flat base buy point on Friday, according to IBD MarketSurge.
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