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OpenAI has agreed to buy tens of billions of dollars’ worth of chips from AMD as part of a deal that could also see the ChatGPT maker take a roughly 10 per cent stake in the $270bn chipmaker over time.
The San Francisco-based artificial intelligence start-up said on Monday it had agreed to purchase processors with a total power consumption of 6 gigawatts, roughly equivalent to Singapore’s average demand.
The companies did not put a total dollar figure on the transaction, but OpenAI executives estimate that 1GW of capacity costs about $50bn to bring online, with two-thirds of that spent on chips and the infrastructure to support them.
The deal comes just a fortnight after AMD’s rival Nvidia announced it planned to invest $100bn in OpenAI, with the two companies pledging to deploy 10GW of new data centre capacity.
AMD has also issued OpenAI a warrant to purchase as many as 160mn shares at an exercise price of $0.01 over time based on AMD “achieving certain share price targets” and OpenAI deploying its chips. That would equate to roughly 10 per cent of the company.
AMD’s shares jumped 15 per cent in pre-market trading on the news.
The transaction is the latest intended to accelerate OpenAI’s development of new data centres to train and power its AI models, and to ensure the group’s central position in the race to build the cutting-edge technology.
“This partnership is a major step in building the compute capacity needed to realise AI’s full potential,” OpenAI chief executive Sam Altman said.
But critics have raised concerns over the circular structure of such huge AI infrastructure deals, amid uncertainty over how the vast data centres envisaged by OpenAI would be financed or powered.
AMD has pushed to establish itself as a credible alternative to Nvidia’s chip and software for AI, seeking to narrow Nvidia’s technological lead and winning business from companies such as Microsoft and Meta.
The deal commits OpenAI to buying AMD’s upcoming MI450, its most advanced AI chip, which aims to compete with Nvidia’s latest Blackwell products and is due to hit the market in the second half of next year.
This means OpenAI is likely to be one of AMD’s biggest customers for the new technology, with people familiar with the matter adding that the two groups have worked closely together over recent weeks to determine the specifications of the MI450.
Altman has said AI’s demand for computing power far exceeds current capacity. He is attempting to stimulate infrastructure development, while binding some of the key businesses in the technology’s supply chain closer to his start-up.
OpenAI has also committed to purchasing $300bn in computing power from Oracle over the next five years, and is working with Oracle, SoftBank and other development partners to build US data centres with a further 7GW of power demand. In addition, it is working to produce its own AI chips with Broadcom.
In all, those deals commit OpenAI to using 23GW of new capacity which, by the company’s own estimation, would cost well over $1tn to develop.
The company’s growth since the 2022 release of ChatGPT has been unprecedented, with revenue having shot up to about $13bn on an annualised basis.
But OpenAI remains lossmaking due to the steep cost of model development, marketing and hiring. Its recent deals are long-term and will be paid in increments as operational expenditure, meaning OpenAI is not committing to spending hundreds of billions of dollars upfront.
As part of its arrangement with AMD, OpenAI could buy chips directly or rent them via a third party cloud company, according to a person with knowledge of the deal. Nonetheless, the company must find creative ways to meet its ballooning future liabilities.
OpenAI executives are betting that ChatGPT continues to grow steadily from 700mn weekly users, and that they can push the proportion of paid subscribers beyond its current 5 per cent level. They are also exploring new lines of revenue, including a recently launched shopping feature and an AI device designed with former Apple star designer Jony Ive.
Having raised about $60bn to date, OpenAI is now looking to lean on its partners’ balance sheets and the debt market to meet its insatiable power demands.
OpenAI plans to leverage Nvidia’s equity investment, for instance, using the backing of the world’s most valuable company to secure better terms from lenders, according to an executive at the company.
The AMD deal “is expected to deliver tens of billions of dollars in revenue for AMD while accelerating OpenAI’s AI infrastructure build-out”, said Jean Hu, AMD’s chief financial officer. “This agreement creates significant strategic alignment and shareholder value for both AMD and OpenAI.”
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