OpenAI Signs Multi-Billion Dollar Chip Deal with AMD

AFP/APP

New York: OpenAI on Monday announced a multi-year partnership with chipmaker Advanced Micro Devices (AMD) as the ChatGPT-maker expands its investment in computing power to support generative artificial intelligence.

The companies plan to develop AI data centers, which AMD projects could generate tens of billions of dollars in revenue over the next five years.

Following the announcement, AMD’s share price surged 35 percent as the company agreed to deliver six gigawatts worth of chips to OpenAI.

OpenAI sits at the center of a massive AI investment boom. Its Stargate project has already secured $400 billion of the $500 billion planned by 2029 for giant data centers in Texas, New Mexico, and an undisclosed Midwest location.

This deal with AMD follows a $100 billion contract with Nvidia aimed at increasing OpenAI’s generative AI capabilities. Nvidia’s graphics processing units (GPUs) dominate the AI market, making it harder for competitors to challenge its ecosystem.

“We need as much computing power as we can possibly get,” OpenAI President Greg Brockman told CNBC.

“What we’re really seeing is a world where there’s going to be absolute compute scarcity, because there’s going to be so much demand for AI services and not just from OpenAI,” he added.

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California-based AMD generates most of its revenue from CPUs, which are less powerful than GPUs but essential for large-scale computing. Last week, OpenAI also signed deals with South Korea’s Samsung and SK Hynix.

Data server giant Oracle, a major Stargate partner, saw its share price rise 35 percent last month after announcing its own deal with OpenAI.

It remains unclear how OpenAI will finance these deals. The company is years away from profitability, as the computing costs required for its AI services far exceed revenue from ChatGPT and other products. Nonetheless, Wall Street’s faith in AI’s future remains strong, making OpenAI the world’s most valuable private company, surpassing Elon Musk’s SpaceX at $500 billion.

Monday’s announcement also highlights OpenAI’s strategy to diversify its semiconductor supply, reducing reliance on US GPU powerhouse Nvidia. Analysts note AMD faces competition from Nvidia, China’s Huawei, Amazon, and Google.

“This is yet another validation sign that the AI arms race is heating up among Big Tech firms, with AMD now joining the AI party,” said Dan Ives of Wedbush Securities.

Under the deal, AMD will issue OpenAI 160 million warrants, financial products convertible to shares, potentially giving OpenAI ownership of roughly 10 percent of AMD.