Interview with OpenAI and AWS CEOs about Bedrock Managed Agents

Good morning,

As I noted yesterday, today’s Stratechery Interview is early in terms of my timing — Tuesday instead of Thursday — and late in terms of delivery — 1pm Eastern instead of 6am — because the topic was embargoed. That embargo created a bit of a weird situation for me over the last several days:

• Last Friday I conducted the following interview with OpenAI CEO Sam Altman and AWS CEO Matt Garman about Bedrock Managed Agents, powered by OpenAI; naturally, one of my questions was about how this fit in with OpenAI’s deal with Microsoft giving Azure exclusive access to OpenAI models.
• Late Sunday I heard through the grapevine that Microsoft would announce something Monday morning; I wondered if it might be a preemptive lawsuit!
• On Monday Microsoft and OpenAI announced they had amended their agreement, allowing OpenAI to serve its products on other cloud providers, including AWS.

So here we are.

I think the Microsoft-OpenAI deal makes a lot of sense for both sides. Here are the bullet points of the new arrangement from Microsoft’s post:

• Microsoft remains OpenAI’s primary cloud partner, and OpenAI products will ship first on Azure, unless Microsoft cannot and chooses not to support the necessary capabilities. OpenAI can now serve all its products to customers across any cloud provider.
• Microsoft will continue to have a license to OpenAI IP for models and products through 2032. Microsoft’s license will now be non-exclusive.
• Microsoft will no longer pay a revenue share to OpenAI.
• Revenue share payments from OpenAI to Microsoft continue through 2030, independent of OpenAI’s technology progress, at the same percentage but subject to a total cap.
• Microsoft continues to participate directly in OpenAI’s growth as a major shareholder.

I think the most important point is the last one. Azure had a real competitive advantage thanks to being the only hyperscaler able to offer OpenAI models, but this also hindered OpenAI, particularly once it became clear that many enterprises cared first and foremost about accessing models on their current cloud of choice; I’ve been noting for a while that this was a real competitive advantage for Anthropic. In other words, Azure’s exclusivity was actively damaging Microsoft’s investment in OpenAI, and given Anthropic’s rapid growth this year, Microsoft needed to tend to their investment, even if it diminished Azure’s differentiation.

OpenAI, meanwhile, clearly sees AWS as a massive opportunity — so much so that they are forgoing Azure-related revenue for the next few years (which, per the previous point, will help Azure management feel better about losing their exclusivity; their PnL is going to look a lot better without paying a revenue share to OpenAI). OpenAI is also releasing Microsoft from the AGI clause; now the agreement between the two companies will run through 2032 no matter what.

What does seem clear is that OpenAI’s focus is going to be on AWS, and the greatest evidence in that regard is the topic of this interview: Bedrock Managed Agents, powered by OpenAI. The easiest way to think about this offering is Codex in AWS; a lot of what makes Codex work is the fact that it is local, which gives you a lot of complexity, particularly in terms of security, for free. It’s another thing entirely to figure out how to make agents work across an organization, and the goal of this offering is to make these workflows much more accessible for organizations who already have most of their data in AWS.

To that end, in this interview, we discuss how AWS created the entire cloud category, and the impact it had on startups, and how AI is both similar and different to that previous paradigm shift. Then we discuss Bedrock Managed Agents, what it is, and how it differs from Amazon’s existing AgentCore offering. We also touch on Trainium and why chips won’t matter to most AI users, and why partnering makes sense relative to Google’s focus on full integration.

As a reminder, all Stratechery content, including interviews, is available as a podcast; click the link at the top of this email to add Stratechery to your podcast player.

On to the Interview:

An Interview with OpenAI CEO Sam Altman and AWS CEO Matt Garman About Bedrock Managed Agents

This interview is lightly edited for clarity.

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