OpenAI Powers Up With Massive Deal for AMD Chips

Nvidia’s got some competition: Rival chip-maker AMD signed a deal with OpenAI to provide its GPUs to the AI leader. The five-year agreement will see OpenAI scoop up hundreds of thousands of AMD’s chips, or about six gigawatts worth. That’s enough to power roughly 5 million US homes. OpenAI will put the chips to work in data centers that’ll provide the staggering compute ChatGPT needs to remain everyone’s favorite therapist.

AMD, whose stock surged nearly 38% yesterday morning, said the tie-up will generate tens of billions of dollars in revenue. OpenAI will also receive warrants enabling it to buy up to 10% of AMD stock at a penny a share, to be awarded over time as certain milestones are met.

Chip Off Your Shoulder

Nvidia is the No. 1 AI chip seller, with Mizuho Securities estimating that the company controls more than 70% of the market. Nvidia’s expected to make more than six times as much revenue as AMD this year ($206 billion vs. $33 billion).

But with the need for AI power growing fast, rivals have ample room to butt in, especially as they work to offer cheaper alternatives to Nvidia’s industry-leading, but pricey, chips. And OpenAI is playing the field to get power from every corner it can as the AI industry becomes increasingly crowded and costly:

• OpenAI is working with Broadcom to create its own AI chip, which will help train its tech, as part of a $10 billion partnership. Meanwhile, OpenAI also made a $300 billion deal with cloud leader Oracle last month to secure 4.5 gigawatts of cloud computing power through the tech leader’s data centers. 
• Additionally, OpenAI has a deal with Nvidia on the horizon in which Nvidia plans to invest $100 billion in OpenAI over the next decade; OpenAI is expected to use that investment in part to buy 10 gigawatts’ worth of Nvidia’s chips. But while Nvidia and OpenAI have signed a letter of intent, AMD may yet beat them to the punch. OpenAI and AMD are planning to jumpstart their arrangement by filing for regulatory approval ASAP. Plus, the AMD deal would give OpenAI the power to influence the chipmakers’ plans, which could make it a more appealing partner than Nvidia. 

Bubble Trouble: OpenAI CEO Sam Altman is channeling the Kylo Ren “MORE” meme. The company has made deals totaling about $1 trillion over the past two weeks as Altman underscores the need for more computing power to meet AI’s future requirements. Including other tech companies like Alphabet and Microsoft, The Wall Street Journal reports that spending on AI has far exceeded any other past technological revolution (railroads, electricity, fiber-optic). Whether or not the industry’s a bubble on the verge of bursting, the leaders at its helm stand by the underlying tech.