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Talk about an endorsement! For all the talk about OpenAI falling behind Google, the ChatGPT maker doesn’t seem to be having any problems attracting big backers. Last week it was Disney, putting in $1 billion, and soon it’s likely to be Amazon, judging from The Information’s scoop on Tuesday night that Amazon was in talks to invest more than $10 billion in OpenAI. On top of that, tonight we scooped the news that OpenAI is discussing with some investors raising as much as $100 billion.
All this means it will be harder for others on the front lines of AI development to keep up. Google, at least, has the resources to do so, given that it has a hugely profitable ad business and a money-making cloud business that’s directly benefiting from new AI services. Anthropic has the backing of Amazon and Google, and its business appears to be flourishing. The big questions hang over Meta or xAI, which are trying to compete with Google and OpenAI in AI models but without an obvious business model to earn a return on the development costs. (See here for more on xAI’s efforts to develop a business model.)
One possibility is that one of those companies folds. You can imagine a day in a couple of years when Meta gives up on developing its own AI models and decides to use Google’s, say, or maybe OpenAI’s. Musk is in a different position, having a vast empire that encompasses self-driving cars, robots and rockets. Maybe he will find a way to stick it out on his own.
An unanswered question is why Amazon would invest billions in OpenAI, particularly as it is already allied with Anthropic. The answer may be simple: CEO Andy Jassy has decided OpenAI will be one of the big winners in AI and is worth getting close to. By taking a stake in the company, Amazon could benefit financially if OpenAI succeeds. There's also potential business benefits: OpenAI has already committed to spend $38 billion on Amazon Web Services over several years, to be sure, but by investing Amazon could win more cloud business in the future. The investment could also help Amazon win over OpenAI as a customer for its Trainium chips, according to our report, which would be meaningful. There’s also the chance the two companies could work together on things like shopping or the development of agents. Moreover, if helping OpenAI succeed weakens Amazon’s rival Google, so much the better. (Meanwhile, Amazon today shook up its AI team.)
WBD to Ellison: ‘Show Us the Money’
How much can Larry Ellison really afford to spend helping his son buy Warner Bros. Discovery? That question seems to be at the heart of the WBD board’s rejection of the bid, made through David Ellison’s Paramount Skydance entertainment company. The elder Ellison has promised to backstop the $41 billion in equity financing needed for the $108 billion deal, but he hasn’t personally guaranteed the money, WBD notes in a securities filing.
Moreover, the company points out that there’s a lot unknown about Larry Ellison’s finances. Paramount has said the money would be coming from his trust, which has “financial resources well in excess of what would be required to meet its commitments.” That includes Ellison’s 41% stake in Oracle, which is worth more than $200 billion, Paramount said. (It probably doesn’t help that Oracle’s stock price keeps falling and is now down 46% since late September, amid worries about its AI commitments.)
WBD points out that the creditworthiness of Ellison’s trust “is not certain,” describing it as an “opaque entity whose assets, liabilities, beneficiaries, terms, conditions and limitations are not publicly disclosed.” WBD says it’s not even clear whether the trust owns the Oracle shares. WBD also points out that—as we’ve previously reported—Ellison has pledged about 30% of his stake as collateral for personal loans. One other issue: WBD notes that if any WBD shareholder sues the trust, its commitment to the financing “will automatically terminate.”
Ellison is rich, no doubt about it. But what’s he really willing to put at risk in this deal? We have yet to see.
In Other News
• Amazon reorganized its AI development team, it said on Wednesday, by expanding it to also include quantum computing and silicon development, such as that of Trainium chips. Those organizations were previously part of AWS. Amazon’s AI team, which developed its Nova large language models over the past two years, reports directly to CEO Andy Jassy.
• Online education platform Coursera said on Wednesday it would buy rival Udemy for about $950 million in stock, giving the two companies more scale to compete as AI threatens their businesses.
• Oracle shares fell 5.4% after the Financial Times reported that data center investor Blue Owl would not participate in a $10 billion financing for one of the AI data centers Oracle is building for OpenAI in Michigan.
• Manus, an AI agent that briefly went viral earlier this year and got financial backing from Benchmark, said Wednesday that its annual run rate has just reached $125 million, up from $90 million in August.
• Anthropic will get up to 2.3 gigawatts of computing power from data centers Hut 8, a bitcoin mining company with close ties to the Trump family, is developing (more here).
• Tesla will face a possible 30-day ban on selling its vehicles in California unless it changes marketing practices that a state regulator says are misleading consumers about the capabilities of its driver assistance software, according to the California Department of Motor Vehicles.
• Memory chip maker Micron’s shares climbed 8% after it reported 57% growth in revenue of $13.64 billion for its first fiscal quarter, ended Nov. 27, well above its September projection that it would bring in as much as $12.8 billion in revenue. Executives also forecast that Micron’s revenue growth would accelerate next quarter to a rate of 132% year over year.
Check out our latest episode of TITV in which we break down our scoop about Amazon’s talks to invest $10 billion in OpenAI.
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