$NVIDIA (NVDA.US)$Jensen Huang, CEO of NVIDIA, expressed surprise on Wednesday over Advanced Micro Devices’ (AMD) decision to offer 10% of its shares as part of a multi-billion-dollar collaboration agreement with OpenAI announced earlier this week.
Huang commented: “Considering AMD’s high expectations for its next-generation products, this partnership is imaginative, unique, and unexpected. The fact that they would give up 10% of their shares before the product has even been rolled out is surprising to me. However, I think it is indeed a clever move.”
On Monday, OpenAI and AMD officially entered into a partnership: OpenAI committed to purchasing AMD chips worth 6 gigawatts over the next few years, including AMD’s upcoming MI450 series. As part of the agreement, OpenAI will receive options to purchase up to 160 million shares of AMD stock, contingent upon meeting phased targets based on chip deployment volumes and AMD’s share price.
If OpenAI exercises all of these options, it could acquire approximately 10% of AMD’s equity.
This deal poses a challenge to NVIDIA’s dominant position in the AI chip market. Currently, AMD has been striving to catch up with NVIDIA, while major cloud service providers are also developing their own AI chips, collectively undermining NVIDIA’s market advantage.
At the end of last month, NVIDIA announced plans to invest up to $1 trillion in OpenAI over the next decade. In return, OpenAI agreed to build and deploy computing facilities using NVIDIA systems, which will require 10 gigawatts of energy consumption. Huang noted in the announcement at the time that this level of energy consumption would equate to the need for 4 to 5 million graphics processing units (GPUs).
Huang pointed out that NVIDIA’s investment in OpenAI is “fundamentally different” from AMD’s collaboration with OpenAI, as NVIDIA’s investment model allows it to sell products directly to OpenAI, the developer of ChatGPT.
NVIDIA’s investment in OpenAI also highlights concerns in the market about the “circular dependency characteristics” of some AI infrastructure collaborations—where the two parties form tight binding in terms of capital, technology, or market resources, potentially leading to imbalances in competitive dynamics or risk transmission issues.
When asked how OpenAI would raise funds for its collaboration with NVIDIA, Huang responded: “They do not currently have sufficient funding.”
"They need to raise this money in various ways: first, relying on their exponentially growing revenue, and second, through equity financing or debt financing," explained Jensen Huang. "At the appropriate time in the future, they will give us an opportunity to participate in the investment alongside other investors."
Jensen Huang also added that his only regret regarding NVIDIA’s previous investment in OpenAI was not investing more at the time.
Editor/Joryn
