OpenAI and AMD partner in 6 gigawatt deal
AMD to provide OpenAI with chips and a 10% stake.
AMD and OpenAI announced a deal yesterday that will see the chip manufacturer supply their next generation of data center chips to the generative AI company. Along with the "hundreds of thousands" of chips, OpenAI gets a warrant for up to 160 million shares of AMD stock — about a 10% stake in the company — at a penny per share.
AMD is the chip manufacturer for this generation of PlayStation, Xbox, Steam Deck, and my own Project JASPER — and seems to be tapped for the next generation as well. AMD holds not-quite 25% of the CPU market and not-quite 10% of GPUs.
With AMD's announcement of the partnership, their stock gained roughly $80 billion in value, its biggest day in over nine years.
Back in September, OpenAI announced a similar deal with Nvidia where Nvidia would provide 10 gigawatts worth of chips to OpenAI while also investing $10 billion into OpenAI for each gigawatt of computing power deployed.
There are two things about these deals that jump out at me, and they're both related to the language used. It's not an order for 1 million chips. Instead, it's a deal that supplies X gigawatts worth of computing power.
And that's because OpenAI is investing heavily in building data centers. And data centers are a big business. Meta, OpenAI, and Oracle have plans to spend $1 trillion on data centers. Amazon, Meta, Microsoft, and Google could spend as much as $320 billion this year. For context, the World Food Program estimates that it would cost roughly $400 billion to permanently end global hunger.
OpenAI and Oracle, along with SoftBank and MGX, started their Stargate Project to invest in the necessary AI infrastructure like data centers. Presumably, those data centers will buy chips from places like Nvidia and AMD.
And why do all the deals talk in terms of power consumption? Because data centers are monsters. In Louisiana, Meta's $10 billion data center will use three times as much electricity as New Orleans (this is the data center Mark Zuckerberg wants to be as big as Manhattan). Data centers, largely driven by AI demand, are expected to increase global power demand by 165% before 2030.
In areas where data centers have been built, by the way, consumer electricity bills have increased 267% from five years ago. Not to mention things like the disruption to the water supply and the rapid expansion of power infrastructure reverting to gas and coal plants.
This year, investment in AI accounts for 40% of the US's GDP and 80% of stock gains. Also this year, MIT found that, despite roughly $40 billion of investment into generative AI, 95% of projects did not produce any return on investment.
