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OpenAI and Broadcom have announced a multi-billion dollar deal to develop 10 gigawatts of custom AI chips over the next four years. This collaboration will enable OpenAI to design its own GPUs, powering both its data centers and those of its partners. The chips are expected to roll out in the second half of next year.
NVIDIA's $100 billion investment in OpenAI involves using NVIDIA's AI semiconductors in OpenAI's data centers, raising concerns about late-stage bubble dynamics similar to past tech bubbles.
Despite skepticism about the feasibility of OpenAI's deals, Broadcom's market value surged by $150 billion following the announcement, driven by excitement over AI and data centers.
The AI money bubble is a significant concern, with over a trillion dollars of incremental CapEx being announced, such as the recent OpenAI and Broadcom deal. This level of capital expenditure raises red flags about how it's being financed.
The recent OpenAI-Broadcom deal is valued at approximately $350 billion, or $88 billion per year, based on the estimation that one gigawatt of chips equals about $35 billion. This deal adds to OpenAI's existing commitments with AMD, Nvidia, CoreWeave, and Oracle, totaling around $880 billion.