"The cycle of colossal capex spending, driven by OpenAI, is one of the year's biggest market trends, and it's one that Bank of America thinks could ultimately lead to trouble for mega-cap tech giants The investment bank recently highlighted a paradox: while AI hyperscalers are rushing to ink deals with OpenAI, they are also locked in competition with the ChatGPT maker."
"Posted said that investors should consider the bigger picture as OpenAI reshapes the broader tech landscape. "The strategic risk is two-sided," he said. "If OpenAI succeeds, it becomes a bigger competitive threat; but if the company underachieves internal targets, it may under-utilize its contracted compute, contributing to excess capacity and lower Cloud industry revenues." Post added that OpenAI has signed large-scale deals with Microsoft, Google, Amazon Web Services, and Oracle, among others."
""We think the rational for adding OpenAI as a cloud customer could be threefold: 1) important to drive Cloud AI scale, and OpenAI would be able to find capacity elsewhere, 2) potential for deeper partnerships to bring OpenAI's frontier models onto Cloud platforms (though Microsoft deal dependent), 3) will be manageable exposure at less than 10% of total Cloud revs," Post said."
OpenAI has completed more than $1 trillion in deals this year, accelerating demand for AI infrastructure and prompting substantial capital expenditure by cloud providers. Bank of America identifies a paradox: hyperscalers are contracting with OpenAI while simultaneously facing growing competition from the company as it scales. Success by OpenAI could make it a significant rival; underperformance could leave contracted compute underutilized, creating excess capacity and pressure on cloud revenues. OpenAI has signed major agreements with Microsoft, Google, AWS, and Oracle. Cloud providers cite scaling AI workloads, deeper partnerships, and limited revenue exposure under 10% as rationale for hosting OpenAI.
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