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OpenAI, the creator of ChatGPT, is reportedly in early talks with Amazon.com Inc. for a massive funding and technology partnership. The potential deal is centered around Amazon investing at least $10 billion in OpenAI and OpenAI agreeing to adopt Amazon's in-house AI chips, known as Trainium, as reported by Bloomberg.

This strategic move would significantly broaden Amazon's footprint in the competitive artificial intelligence sector, positioning it to challenge the market dominance of current chip leader Nvidia Corp.

News of the talks put Amazon’s shares in focus, with the stock trading 0.79% higher in pre-market session on Wednesday.

The Amazon stock closed nearly flat at $222.56 on Tuesday.

The deal could value OpenAI above $500 billion, though discussions are in the initial stages and terms could shift, the Bloomberg report said.

For Amazon, securing OpenAI's adoption of its Trainium chip would be a major victory for its semiconductor division, especially as major developers like Meta Platforms Inc. begin exploring alternatives to Nvidia’s specialized AI hardware.

The negotiations between Amazon and OpenAI reportedly commenced in October, following a year-long corporate overhaul at OpenAI, which resulted in Microsoft taking a 27% ownership stake in the ChatGPT creator, the Information reported earlier.

Amazon is leveraging its custom Trainium chip as a central element of its strategy to solidify its standing in the artificial intelligence market, aiming to bolster its cloud division, Amazon Web Services (AWS). Although AWS is the world’s largest vendor of cloud computing services and data storage, it has faced difficulties in replicating that leadership position among AI developers, primarily due to intense competition from rivals such as Microsoft Corp., a major backer of OpenAI.

Amazon's primary tactic to gain market share is offering a better value proposition. The company claims that its Trainium chips can perform the rigorous calculations required for AI model training more affordably and efficiently than the industry-leading Graphics Processing Units (GPUs) manufactured by Nvidia.

In terms of financial scale, OpenAI was recently valued at $500 billion during an employee share sale, a figure that temporarily made it the world's most valuable startup, surpassing Elon Musk’s SpaceX.

Despite the push for Trainium, Amazon and OpenAI last month announced a massive $38 billion, seven-year deal for AWS to supply cloud computing power to the startup. This particular agreement, however, was centered on providing hundreds of thousands of Nvidia chips, rather than Amazon's custom hardware.

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