Amazon is in talks to invest more than $10bn (£7.5bn) in OpenAI, in the latest funding deal being struck by the startup behind ChatGPT.

If it goes ahead, the market valuation of OpenAI could rise above $500bn, according to The Information, a tech news site that revealed the negotiations.

Amazon, which is best known as an online retailer, is also the world’s largest datacentre provider and its investment would help OpenAI pay for its commitments to rent capacity from cloud computing companies – including Amazon.

OpenAI said last month it would spend $38bn on capacity from Amazon Web Services – the company’s datacentre arm – over seven years. The Information said that OpenAI planned to use Amazon’s Trainium chips, which compete with Nvidia and Google’s chips. It also reported that Amazon’s financing could lead to a broader fundraising round with other investors.

OpenAI’s spending commitment on compute – the chips and servers that power its chatbot – is $1.4tn over the next eight years, a figure far in excess of its reported $13bn in annual revenues.

As a result, the lossmaking company has been seeking further funding and has converted its main business into a for-profit corporation. Its main longtime backer, Microsoft, has taken a stake of roughly 27% in a deal that valued OpenAI at $500bn.

OpenAI is also considering an initial public offering – selling its shares to the general public – in a move that could value the company at up to $1tn, according to Reuters.

Other deals struck by OpenAI this year include Oracle spending $300bn on building datacentres in Texas, New Mexico, Michigan and Wisconsin. OpenAI is expected to pay back roughly the same amount to use the sites.

In another transaction with Nvidia, OpenAI will pay in cash for chips and Nvidia will invest in OpenAI for non-controlling shares.

OpenAI announced on Tuesday that it had hired the former UK chancellor George Osborne to develop relationships with governments around the world and broker national-level AI projects.

Sam Altman, OpenAI’s chief executive, has declared a “code red” staff alert to lead a fightback against competitors led by Google, whose update of its Gemini AI tool gave it an edge over rivals including ChatGPT.

The Amazon talks reportedly include discussing commercial opportunities and selling a corporate version of ChatGPT to the online retailer.

OpenAI declined to comment. Amazon has been approached for comment.