Sometimes, the bigger the dream, the harsher the reality.
In February this year, OpenAI CEO Sam Altman made headlines with his ambitious plan to raise $7 trillion to build a chip empire. However, recent reports indicate that OpenAI has taken a more pragmatic approach, opting to collaborate with partners to develop its own AI chip instead of creating an extensive chip factory network.
On Tuesday, October 29, Reuters reported, citing sources familiar with the matter, that OpenAI has decided to abandon its lofty chip factory plan due to the high costs and time required to establish such a network. Instead, the company is focusing on in-house chip design.
The report stated that OpenAI has formed a chip team of around 20 people, led by top engineers who previously worked on Google's Tensor Processing Unit (TPU). Together with Broadcom and TSMC, they are working to develop OpenAI's first custom chip, designed to support its AI systems with a focus on inference.
OpenAI has reportedly been working with Broadcom for several months and, through this partnership, has secured production capacity with TSMC. The plan is for TSMC to manufacture OpenAI's first custom-designed chip by 2026. OpenAI has yet to finalize whether it will develop or acquire other elements of its chip design, and it may partner with additional companies for the chip's development.
Additionally, to meet its growing infrastructure demands, OpenAI is set to use AMD chips alongside its current reliance on NVIDIA chips, the report mentioned.
This isn't the first time rumors of OpenAI collaborating with Broadcom to develop AI chips have surfaced. Back in July, it was reported that OpenAI was actively recruiting former Google employees who had been involved in creating Google's AI chips, specifically TPUs, and was in talks with Broadcom and other chip design companies to develop new AI chips.
At that time, media outlets noted that Altman had discussed with TSMC executives the possibility of increasing production capacity to manufacture more NVIDIA chips or a new AI chip proposed by Altman. TSMC executives told Altman that they would consider expanding chip production if OpenAI could commit to large orders for new chips.
Developing a new chip is only part of Altman's broader vision. According to reports, he also plans to establish one or more companies with external investors to cover expenses for real estate, electricity, data centers, and the servers that would house these specialized AI chips.
Industry insiders remain skeptical about OpenAI's ability to develop a server chip that could rival NVIDIA's in the near term. Many believe it would take years to achieve such a goal, and it could risk angering NVIDIA, one of OpenAI's most critical chip suppliers. However, it could also give OpenAI leverage in future pricing negotiations with NVIDIA.
Regardless of the challenges, the partnership is a win for Broadcom. Following the initial rumors of collaboration in July, Citi analysts released a report predicting that OpenAI could become Broadcom's fourth-largest ASIC (custom chip) customer, following Google, Meta, and ByteDance. Broadcom is expected to start delivering chips to OpenAI in the second half of next year.
After the renewed reports of OpenAI and Broadcom working together, Broadcom's stock price saw a significant boost. On Tuesday afternoon, its stock surged nearly 3.7% within 20 minutes, reaching an intraday high with gains of just over 4%.
If OpenAI is indeed abandoning its $7 trillion chip empire dream, as the latest reports suggest, it wouldn't come as a surprise. Previous reports had already questioned the feasibility of such a grand plan, calling it "crazy."
To put things into perspective, $7 trillion is roughly 10% of global GDP and nearly 14 times last year's total semiconductor market revenue. Based on stock valuations in February, this amount could have bought up most of the semiconductor ecosystem, including NVIDIA, TSMC, and Broadcom, with enough left over to acquire Meta and still have $300 billion in change.
Media outlets have pointed out that many industry leaders in the chip sector view Altman's factory expansion ambitions as unrealistic, given the enormous financial and labor resources required. For instance, TSMC CEO C.C. Wei remarked in June when asked about the prospects of such a plan, "Sam Altman, he's too aggressive, too aggressive for me to believe."
