Sam Altman spreads open chips on the table.
ChatGpt-Maker said Monday it has agreed to a multi-year deal with AMD to deploy chips that require up to 6 gigawatts of power. The deal also includes an option to take hundreds of billions of dollars in AMD stock off the street.
The announcement comes weeks after news of two additional deals with other chip companies last month. Nvidia announced that Openai will have access to 10 gigawatts of high-power GPUs, along with a $100 billion investment from the chipmaker. Openai plans to collaborate with Broadcom next year to create its first AI chip. Openai also signed a deal with Oracle for AI Compute in July worth more than $300 billion over five years.
The surge in deals shows how Openai has become a dominant force in the chip industry and that Altman is thinking long-term about his company’s access to the hardware so important in the AI race.
Here’s why Openai CEO is spreading a pile of investor cash among shipmakers.
At least 2 chip race
Nvidia has become the main seller of AI Gold Rush picks and shovels. Its AI chips are the most widely used by AI companies across the AI ecosystem.
That advantage has made Nvidia the world’s most valuable company and placed it in a powerful position to dictate terms with customers. For years, Openai has relied heavily on Nvidia GPUs accessed through Microsoft’s Azure Cloud. Monday’s deal not only sells, but also points the way for AMD to expand its AI technology beyond its current limitations.
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“The partnership represents a key moment for AMD’s AI business,” according to analysts at BNP Paribas, validating the company’s technology in a market dominated by one name.
AI Infrastructure Firm Peak: More competition in the AI chip market has the potential to benefit all model makers in the long run, according to Roger Cummings, CEO of AIO.
Cummings told Business Insider that Openai’s diversification across Chip Companies is “a play for long-term resiliency and innovation,” and increasing competition will reduce supply chain risk and lower chip prices.
Also, by striking deals with chip designers like AMD, Openai can hedge its dependence on Nvidia and spread risk into its supply chain, which is vulnerable to geopolitics and natural disasters.
AMD will catch up
AMD has been playing catch-up to Nvidia in the AI race for years. While the company has loyal customers and a thriving CPU business, its foothold in the world of AI Compute is more tenuous. A splashy deal with a company often called the frontrunner of the AI race is cool for chipmakers, according to Futurum Group CEO Daniel Newman.
“No single source can solve infrastructure demands, and what we are successful with in AI efforts will be invaluable in meeting the growing demand for AI infrastructure,” Newman said.
This deal also gives AMD a significant pipeline boost. AMD Chief Financial Officer Jean Hu said the deal is expected to provide the company with “tens of millions of dollars in revenue.”
While Nvidia’s investment in Openai was largely seen as support for Nvidia’s dominance of ChatGpt and its broader roadmap, Monday’s deal provides AMD with a bigger boost.
“Sam Altman has a huge incentive, the way this deal is structured, to succeed at AMD,” Newman said.
It all depends on Openai
In addition to investing in competition among shipmakers, these long trades also serve as a cordial demand signal. Or at least that’s what everyone involved hopes.
I’m worried that the bubble of AI hype is seeping through the summer and into the fall. Deals like this, and Nvidia’s eye-watering $100 billion investment in Openai last month, signal to the broader market that the infrastructure buildout of GPU-filled data centers is here to stay.
“The size of the investment underscores confidence in Openai’s long-term trajectory,” Bank of America’s Justin Post wrote earlier this month in response to Nvidia’s investment in Openai.
That said, while concerns about one chipmaker holding the future of AI may be waning, Openai’s dominance is growing.
These deals are only good business if Openai continues to grow. So, according to Bernstein’s Tongue’s Stacey Rasgon, Altman “has the power to either crash the world economy for a decade or take us to the promised land, and we don’t know which is in the cards right now.”
