OpenAI taps Broadcom to build its first AI processor in latest chip deal

(Reuters) -OpenAI has partnered with Broadcom to produce its first in-house artificial intelligence processors, the latest chip tie-up for the ChatGPT maker as it races to secure the computing power needed to meet surging demand for its services. Shares of Broadcom rose more than 7% in early trading. The companies said on Monday that OpenAI would design the chips, which Broadcom will develop and deploy starting in the second half of 2026. They will roll out 10 gigawatts' worth of custom chips, whose power consumption is roughly equivalent to the needs of more than 8 million U.S. households or five times the electricity produced by the Hoover Dam. The agreement is the latest in a string of massive AI chip investments that have highlighted the technology industry's surging appetite for computing power as it races to build systems that meet or surpass human intelligence. OpenAI last week unveiled a 6-gigawatt AI chip supply deal with AMD that includes an option to buy a stake in the chipmaker, days after disclosing that Nvidia plans to invest up to $100 billion in the startup and provide it with data-center systems with at least 10 gigawatts of capacity. "Partnering with Broadcom is a critical step in building the infrastructure needed to unlock AI's potential," OpenAI CEO Sam Altman said in a statement. Financial details of the agreement were not disclosed and it was not immediately clear how OpenAI would fund the deal. CUSTOM CHIP BOOM The tie-up with Broadcom, first reported by Reuters last year, places OpenAI among cloud-computing giants such as Alphabet-owned Google and Amazon.com that are developing custom chips to meet surging AI demand and reduce dependence on Nvidia's costly processors that are limited in supply. The approach is not a sure bet. Similar efforts by Microsoft and Meta have run into delays or failed to match the performance of Nvidia chips, according to media reports, and analysts believe custom chips do not pose a threat to Nvidia's dominance in the short term. The rise of custom chips has, however, turned Broadcom – long known for its networking hardware – into one of the biggest winners of the generative AI boom, with its stock price rising nearly six-fold since the end of 2022. The company unveiled a blockbuster $10 billion custom AI chip order in September from an unnamed new customer that some analysts and market watchers speculated was OpenAI. Broadcom and OpenAI said on Monday that the deployment of the new custom chips would be completed by the end of 2029, building on their existing co-development and supply agreements. The new systems will be scaled entirely using Broadcom's Ethernet and other networking gear, giving the company an edge over smaller rivals such as Marvell Technology and challenging Nvidia's InfiniBand networking solution. (Reporting by Max Cherney in San Francisco and Arsheeya Bajwa in Bengaluru; Editing by Shinjini Ganguli)

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