Chip Somodevilla/Getty Images
- OpenAI inked a multi-year chip deal with AMD, expanding its hardware strategy.Nvidia dominates AI chips, but OpenAI is offering AMD a massive step forward, analysts said.Recent dealmaking among OpenAI and chipmakers puts even more pressure on the AI company's success.
Sam Altman is spreading OpenAI's chips around the table.
The ChatGPT-maker said Monday that it had agreed to a multi-year deal with AMD in which it will deploy chips requiring up to six gigawatts of power. The deal also includes an option to acquire tens of billions of dollars in AMD stock down the line.
The announcement comes just weeks after news of two additional deals with other chip firms last month. Nvidia announced that OpenAI will gain access to 10 gigawatts of high-powered GPUs, alongside a $100 billion investment from the chipmaker. And OpenAI is set to produce its first AI chip in partnership with Broadcom next year. OpenAI also made a deal with Oracle for AI compute in July, worth more than $300 billion over five years.
The flurry of dealmaking demonstrates how OpenAI has become a dominant force in the chip industry, and how Altman is thinking long-term about his company's access to the hardware that is so vital in the AI race.
Here's why the OpenAI CEO is spreading its piles of investor cash among chipmakers.
It's at least a 2-chip race
Nvidia has become the main seller of the picks and shovels in the AI gold rush. Its AI chips are the most widely used by AI companies across the AI ecosystem.
That dominance has made Nvidia the most valuable company in the world — and put it in a strong position to dictate terms with its customers. For years, OpenAI has relied heavily on Nvidia GPUs that it has accessed through Microsoft's Azure Cloud. Monday's deal lays out not just sales, but a path toward scaling AMD's AI technology beyond its current limitations.
"The partnership represents a key moment for AMD's AI business," according to BNP Paribas analysts, as it validates the company's technology in a market dominated by one name.
More competition in the AI chip market could benefit OpenAI and all model-makers in the long run, according to Roger Cummings, CEO of AI infrastructure firm PEAK:AIO
Cummings told Business Insider that OpenAI's diversification across chip companies is a "play for long-term resilience and innovation" and would mitigate supply chain risks and lower chip prices by increasing competition.
And by striking deals with chip designers like AMD, OpenAI can hedge its reliance on Nvidia and spread the risk to a supply chain that's vulnerable to geopolitics and natural disasters.
AMD playing catch-up
AMD has been playing catch-up to Nvidia in the AI race for years. The company has loyal customers and a thriving CPU business, but its foothold in the world of AI compute has been more tenuous. A splashy deal with the company often referred to as the frontrunner in the AI race is a good look for the chipmaker, said Daniel Newman, CEO of the Futurum Group.
"We won't solve the infrastructure demand from a single source. AMD being successful in its AI endeavors is invaluable to meeting the growing demand for AI infrastructure," Newman said.
The deal also gives AMD a significant pipeline boost. AMD's chief financial officer, Jean Hu, said the deal is expected to deliver "tens of billions of dollars in revenue," for the company.
While Nvidia's investment in OpenAI was largely seen as an endorsement of the dominance of ChatGPT and broader roadmap by Nvidia, Monday's deal offers a bigger boost to AMD.
"Sam Altman has a large incentive, the way this deal is structured, to succeed with AMD," Newman said.
It all depends on OpenAI
In addition to investing in competition among chipmakers, these longer deals also serve as a hearty demand signal. Or at least that's the hope of all involved.
Worry about an AI hype bubble has been percolating throughout the summer and into the fall. Deals like this one and Nvidia's eye-watering $100 billion investment in OpenAI last month signal to the broader market that the infrastructure buildout of data centers full of GPUs will continue — strongly implying that underneath is consistent growing demand.
"The scale of investment underscores confidence in OpenAI's long-term trajectory," Justin Post of Bank of America wrote earlier this month in reaction to Nvidia's investment in OpenAI.
That said, while concerns that one chipmaker holds the future of AI may be waning, OpenAI's dominance is growing.
These deals are only good business if OpenAI continues to grow. Therefore, according to a tongue-in-cheek Stacy Rasgon of Bernstein, Altman "has the power to crash the global economy for a decade or take us all to the promised land and right now we don't know which is in the cards.…"
