OpenAI's custom AI chip with Broadcom (with Ed Ludlow)

OpenAI unveiled its first custom AI chip 'Jalapeno' developed with Broadcom, offering 50% lower cost vs typical AI GPUs. This is part of OpenAI's strategy to own more of the infrastructure stack and reduce reliance on Nvidia. Broadcom CEO Hock Tan sees every frontier lab eventually having custom chips, with no limit to demand for this infrastructure.

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OpenAI's custom AI chip with Broadcom (with Ed Ludlow)

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Broadcom shares opened higher on the news. The custom chip trend benefits Broadcom and signals continued massive AI infrastructure spending.

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No specific mention of small-cap stocks. The story focuses on large-cap tech companies.

OpenAI is compute-constrained and heavily reliant on Nvidia. They want to diversify. What do we need to know?

Ed Ludlow
Seth Fiegerman

OpenAI wants to own more of the infrastructure stack and use expertise in making AI models run better to apply to hardware, similar to Google with TPUs. The hope is to build a more cost-efficient and better performing chip over time.
Broadcom's Hock Tan sees a world where every frontier lab will have a custom chip. Why?

Ed Ludlow
Seth Fiegerman

It gives them versatility to control their infrastructure stack and build custom hardware. Hock Tan sounds very bullish - he sees no limit to demand and predicts the chip rollout next year will exceed prior estimates of 1.3 gigawatts of supply.

Reading between the lines, this raises the question of whether Anthropic will move in this direction too.
How will this custom chip rank in OpenAI's overall compute plan?

Ed Ludlow
Seth Fiegerman

They remain tight-lipped on financing. We've reported OpenAI plans to spend tens of billions on these chips with Broadcom as part of hundreds of billions in infrastructure commitments. Broadcom has discussed a chip financing vehicle but it's unclear if that's the primary mechanism.

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