OpenAI plans to develop its own artificial intelligence chips to challenge Nvidia's chip throne

Author: Anna Tong, Max A. Cherney, Stephen Nellis; Compiled by: Heart of the Metaverse

OpenAI, the company behind ChatGPT, is exploring making its own artificial intelligence chips and has begun evaluating a potential acquisition target, according to people familiar with the matter.

The company has not yet decided on a course of action, according to internal discussions recently revealed by Reuters. However, since at least last year, the company has discussed various options to solve the problem of expensive and scarce AI chips that OpenAI relies on.

Those options include making its own AI chips, working more closely with other chipmakers including Nvidia, and diversifying its suppliers beyond Nvidia.

OpenAI declined to comment.

CEO Sam Altman makes acquiring more artificial intelligence chips a top priority for the company. He has publicly complained about the scarcity of GPUs, a market dominated by Nvidia, which controls more than 80% of the world’s market for chips best suited for running artificial intelligence applications.

Atman noted that the effort to acquire more chips is related to two main issues: a shortage of advanced processors to power OpenAI’s software, and the “eye-popping” running costs of the hardware required to power its work and products.

Since 2020, OpenAI has been developing its artificial intelligence generation technology on a massive supercomputer built by one of its biggest backers, Microsoft Corp., that uses 10,000 Nvidia GPUs.

Running ChatGPT is very expensive for companies. Each query costs about 4 cents, according to analysis by Bernstein analyst Stacy Rasgon. If ChatGPT’s search volume grew to one-tenth of Google’s search volume, it would require approximately $48.1 billion worth of GPUs and approximately $16 billion worth of chips per year to keep running.

Customized chip era

Efforts to develop its own artificial intelligence chips would put OpenAI on track to join a handful of tech giants such as Alphabet’s Google and Amazon.com Inc., which are seeking to control chip designs critical to their businesses.

It’s unclear whether OpenAI will move forward with plans for custom chips. Industry veterans say that doing so would be a major strategic move and a huge investment that could cost hundreds of millions of dollars annually. Even if OpenAI devotes resources to this task, success is not guaranteed.

Acquiring a chip company could speed up OpenAI’s development of its own chips, like Amazon.com Inc.'s acquisition of Annapurna Labs in 2015.

OpenAI has considered this path and investigated potential acquisition targets, according to people familiar with its plans.

The identity of the company OpenAI is exploring acquisitions is not yet known.

Even if OpenAI moves forward with plans for custom chips, including acquisitions—an effort that could take years, the company will rely on commercial suppliers like Nvidia and AMD.

Some big tech companies have been building their own processors for years, with limited success. According to Reuters, Meta’s custom chip work has been plagued by problems, leading the company to scrap some of its artificial intelligence chips. The company is currently developing a new chip that will cover all types of artificial intelligence work.

According to The Information, Microsoft, OpenAI’s main supporter, is also developing a customized artificial intelligence chip, and OpenAI is testing it. These plans may signal further distance between the two companies.

Since the launch of ChatGPT last year, demand for specialized artificial intelligence chips has surged. In order to train and run the latest generative AI technologies, specialized chips or AI accelerators are required. Nvidia is one of the few manufacturers producing practical AI chips and dominates the market.