OpenAI announces Broadcom deal as spending spree continues

OpenAI, the company behind ChatGPT, announced Monday it is teaming up with chip giant Broadcom to design and build its own specialised computer processors for artificial intelligence.

The partnership is the latest in a series of recent announcements by OpenAI as it seeks to strengthen its position as the preeminent company of the generative AI revolution that began with the release of ChatGPT in November 2022.

The partnership, which the companies said would launch next year, would provide 10 gigawatts in computing power, requiring roughly the energy equivalent needed to power a major city.

In the past few weeks, under the leadership of CEO Sam Altman, OpenAI has signed deals involving huge investments in data centres and AI chips with US companies Nvidia, AMD, and Oracle, as well as with South Korea’s Samsung and SK Hynix.

The partnerships come as there are no real signs that the AI business is close to breaking even, despite strong growth and intense investor interest.

The deals to build AI’s immense infrastructure needs also threaten to overburden electricity providers, with AI chips and data centres demanding significant power and resources to deliver the required computing capacity.

The financial terms of the deal with Broadcom were not part of the announcement and remain unclear for many of the recent deals involving OpenAI.

That has drawn some skepticism from observers who worry the AI frenzy may have created a financial bubble, posing a risk to investors and echoing the build up and subsequent crash of the late 1990s dotcom boom.

Still, shares in Broadcom rose nearly ten percent on the news, reflecting stock price surges from AMD and Oracle following their own deals with OpenAI, which is the world’s most valuable privately held company.

By designing its own chips rather than relying on off-the-shelf processors, OpenAI says it can build hardware specifically tailored to how its AI models work, potentially making them faster and more powerful.

“Partnering with Broadcom is a critical step in building the infrastructure needed to unlock AI’s potential and deliver real benefits for people and businesses,” said Altman, OpenAI’s co-founder and chief executive.

The custom processors will be installed in data centres operated by OpenAI and its partners to keep up with soaring worldwide demand for AI services.

OpenAI has grown rapidly to more than 800 million people using its services weekly since its 2022 launch, making ChatGPT the fastest-growing consumer app ever.

Broadcom, which will manufacture and help develop the chips, called the collaboration “a pivotal moment” in AI development.