Can Amazon (AMZN) Extend Its AI Leadership After Securing the Recent OpenAI Partnership?

Amazon.com Inc. (NASDAQ:AMZN) is among the most fantastic stocks every investor should pay attention to. Amazon is a consensus Buy and is currently one of the most analyst-favoured mega-cap stocks. While its year-to-date returns have been subdued, analysts still see a nearly 20% potential upside.

Two events primarily drove the renewed enthusiasm for Amazon over the last two weeks: the first was the Q3 results, which came in strong, particularly the growth in Amazon’s cloud business. Secondly, Amazon struck a deal worth $38 billion with OpenAI, the parent company of ChatGPT, for providing cloud computing capacity for a period of seven years, as reported by Bloomberg on November 3.

As per the deal, Amazon Web Services (AWS) will provide OpenAI access to its hoard of Nvidia graphics processing units (GPUs). The Blomberg report notes that this deal brings Amazon.com Inc. (NASDAQ:AMZN) exposure to OpenAI, as it had not previously provided any services to that company, unlike other large cloud-computing companies.

On the deal, Matt Garman, AWS Chief Executive Officer, stated:

“As OpenAI continues to push the boundaries of what’s possible, AWS’s best-in-class infrastructure will serve as a backbone for their AI ambitions.”

On the other hand, OpenAI CEO Sam Altman said in a statement:

“Our partnership with AWS strengthens the broad compute ecosystem that will power this next era and bring advanced AI to everyone.”

Amazon.com Inc. (NASDAQ:AMZN) operates across e-commerce, digital content, advertising, and cloud computing. Its online and offline stores offer both in-house and third-party products, while its Amazon Web Services (AWS) division runs one of the world’s largest data center networks.

While we acknowledge the potential of AMZN as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.