American Marconi Wireless News - OpenAI signs multi-billion dollar chip deal with AMD

The companies announced the plan to develop AI data centers that the chipmaker said would bring in tens of billions of dollars in new revenue over the next five years.

AMD's share price surged 35 percent when markets opened on news of the agreement that would see the company deliver six gigawatts worth of chips to the ChatGPT-maker.

OpenAI sits at the center of an AI investment bonanza to power the promised artificial intelligence revolution.

It oversees the Stargate project, which has secured $400 billion of the $500 billion planned by 2029 for giant data centers in Texas, New Mexico and an undisclosed site in the US Midwest.

The deal with AMD follows a contract with Nvidia for more than $100 billion in equipment intended to increase OpenAI's generative AI capabilities.

Nvidia's graphics processing units (GPUs) are by far the dominant player in the AI field, with its products integrated into the company's software ecosystem, making it harder for rivals to compete.

"This is all incremental to our work with NVIDIA (and we plan to increase our NVIDIA purchasing over time). The world needs much more compute..." wrote OpenAI CEO Sam Altman on X.

California-based AMD generates the bulk of its revenue from CPU sales -- processors used for personal and business computers that are less powerful than GPUs.

Data server giant Oracle saw its share price skyrocket by 35 percent last month when it announced its own deal with OpenAI.

OpenAI also signed a chip deal with South Korea's Samsung and SK Hynix.

It was not immediately clear how OpenAI would finance the deals.

OpenAI is years away from turning a profit, with the costs of computing needed to power the company's AI needs far surpassing revenue from paying customers of ChatGPT and other products.

However, Wall Street's faith in the future of AI remains strong, and OpenAI is now the world's most valuable private company, surpassing Elon Musk's SpaceX, worth $500 billion with investment still pouring in.

Monday's announcement shows OpenAI moving to diversify its supply of semiconductors so that it does not depend solely on US powerhouse Nvidia for the GPUs that are key to the development of generative AI.

Analysts say chipmaker AMD is facing competition from -- in addition to Nvidia -- China's Huawei, as well as Amazon and Google.

Under the deal Monday, AMD will issue OpenAI 160 million "warrants" -- a financial product that can be converted to shares under certain conditions, leaving the AI giant in a position to buy roughly 10 percent of AMD.

B.Finley--AMWN