OpenAI made a huge investment in AMD this morning, prompting the company’s market cap to rise by around $100 billion. This may help the manufacturer remain competitive next to Nvidia’s rapid gains.
The AI developer also plans to invest $100 billion into Nvidia, one of the world’s largest tech companies. By favoring both firms, OpenAI could prevent monopoly-like conditions from harming innovation.
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OpenAI’s AMD Deal
This morning, OpenAI announced a massive deal with AMD, a US chip manufacturer, to deploy 6 gigawatts of its GPUs. This arrangement brought a huge boost to AMD’s stock, causing some observers to speculate that it caused a major Robinhood outage.
At this rate, the company may break impressive stock trading records:
However, some analysts have looked a little deeper into this deal. OpenAI CEO Sam Altman called the AMD deal “a major step” in “[realizing] AI’s full potential,” but there may be an unspoken motive too.
AMD and Nvidia have been competing for years in the US chip industry. Is OpenAI trying to keep Nvidia’s competitor viable?
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Nvidia On the Rise
Specifically, less than two weeks ago, the AI company announced a $100 billion deal with Nvidia, boosting its market cap by around $177 billion. The chip maker has also been making crucial inroads with other partners in the AI space, aiming to dominate the sector long term.
Nvidia is one of the famed “Magnificent 7” stocks, while AMD’s share price has been stagnating for the past month. That is, until OpenAI juiced its valuation with a major partnership:
AMD Price Performance. Source: Google FinanceIn other words, OpenAI’s investment may be a much-needed boost to AMD, preventing Nvidia from outcompeting it. Sure, the chip maker has been working steadily, but it needs a healthy share of the astronomical AI capex to stay relevant in today’s market.
Dangers of a Monopoly
Furthermore, Chinese chip manufacturers have been making hardware breakthroughs, pushing Nvidia entirely out of China’s domestic market.
If the American chip industry approaches monopoly-like conditions, failure to innovate could have catastrophic consequences for the AI supply chain.
In other words, OpenAI’s investment in AMD can help prevent that scenario. The AI firm will not be reliant on one company for its hardware requirements, and this industry can maintain fierce competition within the US. Although there is a lot of speculation about a dangerous AI bubble right now, OpenAI might have defused a trigger to pop it.
Source: https://beincrypto.com/openai-amd-deal-chip-monopoly-nvidia/
