Bank of America analyst Justin Post warned that major technology companies face a dual threat as they rush to secure a partnership with ChatGPT maker OpenAI. Analysts warned that these deals could hurt cloud providers regardless of whether the Sam Altman-backed AI startup succeeds or fails. While the industry currently favors high capital expenditures and quick deal closures, investment banking analysts highlight the paradox of hyperscalers funding entities that are both partners and competitors. Post argued that investors need to look beyond current spending trends to understand how these agreements will reshape market conditions.“Strategic risk is two-sided. If OpenAI succeeds, it becomes a greater competitive threat. However, if companies fail to meet their internal goals, they may underutilize contracted compute, leading to overcapacity and lower revenue for the cloud industry.” Post told Business Insider. He said this, referring to the billions of dollars worth of contracts OpenAI has already signed with tech giants including Microsoft, Google, Amazon Web Services, Oracle and others.“We believe there are three reasons to add OpenAI as a cloud customer. 1) Driving scale for cloud AI is important and OpenAI will be able to find capacity elsewhere. 2) Potential for deeper partnerships to bring OpenAI’s frontier models to cloud platforms (subject to agreement with Microsoft, however). 3) This will result in manageable exposure to less than 10% of overall cloud turnover.” The post explained.
How OpenAI can be a threat to contracting companies
Post added that he expects OpenAI to continue to expand and could eventually become a competitive challenge for large technology companies in both enterprise and consumer markets. This may include moving into areas such as advertising and agent-based transaction platforms that allow users to complete tasks and make purchases.He noted that it’s not just the big hyperscalers that could face pressure as startups grow. Analysts at the bank also believe that OpenAI could compete for marketing and advertising dollars, potentially impacting companies such as Facebook’s parent company Meta and Google’s YouTube.“Overall, OpenAI is targeting $41 billion in new product revenue by 2030, which will likely include advertising and e-commerce fees, representing approximately 8% of our 2030 advertising/e-commerce fees industry forecast.” Your post has been highlighted.He explained that the partnership with OpenAI has brought short-term benefits to some technology companies, such as higher stock prices. However, Post noted that ChatGPT makers should still be considered a competitive threat.“Weighing the pros and cons, we still believe OpenAI is a net competitive threat to the Big Tech Internet. The competitive risks across search, e-commerce, and enterprise AI outweigh the modest risk of cloud revenue (less than 5% of AWS rotations due to OpenAI).” The posts continued.
