AWS is negotiating a huge deal to supply IBM with Nvidia GPUs via the cloud

• AWS is negotiating a $475 million AI-cloud deal with IBM.
• IBM already uses AWS services for AI, including training models on EC2 servers with Nvidia chips.
• Amazon recently said its AI business was growing at “triple-digit percentages” annually.

IBM needs more Nvidia GPUs. Amazon Web Services wants to provide them via the cloud.

AWS is in talks for a deal worth roughly $475 million over five years to give IBM access to Nvidia graphics processing units through its cloud service, according to an internal Amazon document obtained by Business Insider.

Under such a deal, IBM would use AWS’s Elastic Compute Cloud servers that come equipped with Nvidia’s AI chips, the document said. IBM Research has already started training some of its AI models on EC2 servers using AWS’s machine-learning platform SageMaker, the document added.

One person familiar with the document and the negotiations said the IBM deal was for AI training and the talks were ongoing. This person asked not to be identified discussing private matters. Further details could not be learned. As with any deal talks, such negotiations could end without a final agreement being signed. Spokespeople for AWS and IBM didn’t respond to requests for comment.

If the companies reach a deal, it could expand the partnership between AWS and IBM in the AI space. In May, IBM announced it was increasing its use of AWS across its Watson AI platform.

The negotiations also highlight continued demand for Nvidia GPUs. AWS has developed its own AI chips, Trainium and Inferentia, and has been pitching cloud customers on using these. Amazon CEO Andy Jassy said recently that AWS’s AI chips were more appealing because of their price and energy efficiency compared with other offerings. Efforts here have been mixed so far, and it’s unclear whether an IBM deal would include access to these homegrown Amazon components.

Still, an AI-cloud deal like this would be a further boost for AWS. During a call with analysts last month, Jassy said the company’s artificial-intelligence business was on pace to generate “multibillion dollars” in revenue this year and growing at “triple-digit percentages year over year.” Amazon’s AI business is “growing three times faster at its stage of evolution than AWS did itself,” he added.

In the most recent quarter, AWS reported $27.5 billion in revenue, up 19% from the year-ago period. Amazon is on pace to invest more than $75 billion in capital expenditure this year, Morgan Stanley recently estimated, and even more next year, mostly on cloud infrastructure such as GPUs, networking, and data centers.

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