OpenAI is collaborating with Broadcom to develop custom AI chips, highlighting the escalating demand for computing power and the industry’s diversification beyond Nvidia. This partnership aims to alleviate shortages hindering new AI system rollouts.
During Broadcom’s recent quarterly earnings call, the company disclosed a $10 billion order from a major AI developer for AI server racks powered by its chips, later identified as OpenAI. Investors positively received this announcement, signaling Broadcom’s increasing significance in providing essential AI infrastructure.
Broadcom, traditionally known for smartphone chips, has expanded into data center technology, experiencing a sixfold increase in its share value since early 2023 due to rapid AI adoption. OpenAI’s investment in custom hardware reflects the broader industry challenge in securing adequate processing capacity, particularly given the increased competition for Nvidia’s GPUs.
Nikolay Filichkin, co-founder of Compute Labs, noted the difficulties faced by hyperscalers in obtaining sufficient GPUs, requiring significant lead times and planning with manufacturers. OpenAI CEO Sam Altman has repeatedly expressed concerns that limited GPU availability is impeding the company’s progress. Altman mentioned that the rollout of ChatGPT-4.5 was delayed due to hardware shortages.
Altman stated that OpenAI plans to add tens of thousands of GPUs in the near term, with eventual plans to incorporate hundreds of thousands, anticipating that “y’all will use every one we can rack up.” To address these shortages, OpenAI has been working with Broadcom for over a year on a custom semiconductor, referred to as XPUs, designed for training large-scale models.
Broadcom CEO Hock Tan emphasized the importance of the $10 billion order, stating that it “really changes our thinking of what 2026 would be starting to look like.” The deal is expected to contribute to Broadcom’s revenue starting in the summer quarter of 2025. In addition to chip development, OpenAI is making substantial investments to expand its computing infrastructure, including a contract with Oracle for over $30 billion annually for cloud hosting capacity.
OpenAI also has a smaller agreement with Google to supplement its computing needs and is pursuing the development of its own large-scale data center project, named Stargate, although progress has been slow. Broadcom’s rise in the AI sector demonstrates how shifts in demand can reshape the technology landscape, with its market capitalization recently surpassing that of Saudi Aramco.
Broadcom recently introduced the Jericho networking chip, designed to enhance AI efficiency by enabling data centers up to 60 miles apart to operate as a single system. This development highlights the company’s growing significance in the AI industry, driven by its strategic expansion into data center technology.
