The big tech world has turned into a “let’s collab and figure out what works” Wild West during the artificial intelligence boom. On one hand, there’s a lot to gain from pooling resources together and expanding the technology as a whole. On the other hand, many of these partnerships are proving to be fluid and subject to change on short notice.

One of the prominent partnerships has been between Microsoft (MSFT +0.38%) and ChatGPT’s creator, OpenAI. They have worked together for years, but on April 27, both companies announced that they had restructured their multibillion-dollar partnership.

And although Amazon (AMZN +0.75%) has nothing to do with that directly, it could wind up being the real winner from the change. 

The history of deals between Microsoft and OpenAI

Microsoft made its first investment in OpenAI in 2019. That $1 billion investment took OpenAI from a lab project to an organization with the computing power it needed to train and scale its models.

Following the unprecedented early success of ChatGPT (it reached 100 million users in two months after its launch), Microsoft began increasing its investments, reaching around $13 billion by the end of 2023.

As part of these investments, Microsoft had an exclusive license to OpenAI’s models, and its cloud platform, Azure, became OpenAI’s sole cloud provider. Microsoft was able to use OpenAI’s models in products like Copilot and in its Microsoft 365 suite (Excel, Word, and so on).

Now that exclusivity is over. As part of the restructured deal, OpenAI is free to sell its models through any cloud provider, including Amazon Web Services (AWS).

Amazon

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How the restructured Microsoft/OpenAI deal benefits Amazon

AWS is the world’s largest cloud services platform, with a 28% market share compared to Azure’s 21% as of the end of last year. It hosts millions of enterprise customers, ranging from young start-ups to trillion-dollar multinationals. Amazon Bedrock is its all-in-one AI platform, allowing customers to build generative AI apps and agentic tools, and to use their own data to customize models.

Different AI models are better for different use cases. For example, Anthropic‘s Claude is known for its nuance and reasoning, while OpenAI’s ChatGPT is better at versatility. Now that Microsoft no longer has exclusivity over OpenAI models, AWS will be able to offer them to its customers, strengthening its competitive advantage.

Previously, if a company viewed OpenAI’s models as being better for its specific needs, it would essentially have to go with Azure. With AWS now an option, more customers may choose that route.

This restructured deal also comes two months after Amazon announced it would invest $50 billion in OpenAI. As part of that deal, OpenAI committed to using Amazon’s Trainum AI chips, and in return, Amazon received the right to host OpenAI’s Frontier models. OpenAI can scale much more, while Amazon gets a cornerstone piece for AWS.

How important is AWS to Amazon’s business?

E-commerce is Amazon’s bread and butter, but AWS is bringing in the profits. AWS only accounted for around 20% of Amazon’s revenue in the first quarter, but it brought in 59% of its operating income (profit from core operations).

Retail — especially on Amazon’s scale — is a notoriously low-margin and relatively slow-growing business. Cloud, on the other hand, is a high-growth business that will drive much of Amazon’s total growth for the foreseeable future.

In Q1, AWS’ revenue increased 28% year over year. Its trajectory was already positive with the expected AI windfalls, but the option to offer OpenAI models could provide another growth spark. This isn’t an “OpenAI is here to save the day” type of partnership. However, it has many positive implications that Amazon investors should be pleased with.

AWS currently has a $364 billion backlog due to capacity constraints (and Azure has a massive backlog for the same reason), but as those get worked out, AWS will have a rejuvenated growth engine in its hands.