Broadcom Shares Rise on AI Chip Development Talks with OpenAI

Broadcom Inc. shares rose nearly 3% on Thursday following a report by The Information, which revealed that the company is in discussions with OpenAI to develop an artificial intelligence (AI) chip. This move could potentially position Broadcom as a significant competitor to Nvidia Corp. in the AI chip market.

OpenAI's Strategy and Collaborations

OpenAI, known for its ChatGPT chatbot, has been engaging in discussions with various chip designers, including Broadcom, as part of its broader strategy to enhance its AI capabilities. This initiative also includes hiring former Google employees who have experience working on Google's Tensor processor.

Market Impact and Stock Performance

Following the news, Broadcom's stock increased by 2.9%, closing at $160.53. The company's stock has surged by 44% this year, largely driven by its growing AI equipment sales. Broadcom’s AI sales are projected to exceed $11 billion in fiscal 2024, according to Chief Executive Officer Hock Tan.

Broadcom's Rapid Progress in AI Market

Despite Nvidia being the dominant player in the AI market, Broadcom is quickly gaining traction. The company provides a variety of components to data center operators who are expanding their facilities to support AI services.

OpenAI's Ambitious Chip Venture

Meanwhile, OpenAI CEO Sam Altman is reportedly seeking to raise billions of dollars from global investors for a chip venture. The aim is to establish a network of semiconductor manufacturing facilities. This strategy comes amid a shortage of expensive graphic processing units (GPUs) that are crucial for developing AI models such as ChatGPT, GPT-4, and DALL-E3.

Ongoing Conversations and Future Plans

OpenAI’s spokesperson confirmed ongoing conversations with industry and government stakeholders to increase access to necessary infrastructure, ensuring the widespread benefits of AI.

Potential Partnerships for Manufacturing

Bloomberg reported earlier this year that OpenAI's plans might involve partnerships with chipmakers like Intel, Taiwan Semiconductor Manufacturing Co., and Samsung Electronics to set up semiconductor factories.