OpenAI has partnered with Broadcom for several months to develop AI inference chips, securing production capacity from TSMC with plans for TSMC to manufacture OpenAI's first custom chip by 2026. Besides using Nvidia's chips, OpenAI also intends to incorporate AMD chips to meet its infrastructure demands. Broadcom's stock (AVGO, Financial) surged by 4% amid the news.
Initially aiming to create a $7 trillion chip empire, OpenAI CEO Sam Altman's ambitious plan shocked the world. Recent reports, however, indicate a shift to a more realistic approach, focusing on internal chip design instead of establishing a chip factory network. This decision stems from the high costs and extended timeline necessary for setting up such an infrastructure.
OpenAI has assembled a team of around 20 engineers, led by a top engineer previously involved in Google's Tensor Processing Unit (TPU) development. Together with Broadcom and TSMC, they aim to create the first in-house chip supporting OpenAI's AI systems, primarily focusing on inference capabilities.
OpenAI is still deciding whether to develop or acquire other elements of its chip design and may collaborate with more partners in the future. To address increasing infrastructure needs, OpenAI plans to integrate AMD chips alongside its current Nvidia chip utilization.
This collaboration isn't the first for OpenAI and Broadcom. Earlier reports in July suggested that OpenAI was recruiting former Google employees who worked on AI chip production and negotiating with companies, including Broadcom, to develop new AI server chips. Altman also discussed with TSMC executives about boosting Nvidia chip production or introducing new AI chip designs.
While developing a chip comparable to Nvidia's server chip seems unlikely for OpenAI, given the long-term investment required and potential risks to their relationship with Nvidia, it could offer leverage in future pricing negotiations. For Broadcom, the partnership is beneficial, as analysts project OpenAI could become their fourth-largest ASIC customer, after Google, Meta, and ByteDance.
Following the renewed collaboration news, Broadcom's stock saw midday gains, surging from under 1.7% to nearly 4% in less than 20 minutes. The possibility of OpenAI abandoning its chip empire aspirations is unsurprising, as some have deemed the dream overly ambitious. The scale of such a venture is immense, equating to about 10% of global GDP and nearly 14 times the total revenue of the semiconductor market last year. Industry insiders have expressed skepticism over the feasibility of such plans, considering the substantial financial and labor resources required.
