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Fed up with expensive AI chips, OpenAI is now planning to start making its own AI chips

OpenAI, the organization responsible for developing ChatGPT, is reportedly considering the possibility of creating its artificial intelligence chips and has even explored potential acquisition targets as part of this endeavor, as per a report by Reuters.

While the company has not decided to proceed with this plan, internal discussions have occurred. It appears that OpenAI has been actively seeking ways to address the shortage of costly AI chips, which are essential to its AI infrastructure, with these discussions dating back at least to the previous year, according to sources familiar with the matter.

These options have included building its own AI chip, working more closely with other chipmakers, including NVIDIA, and diversifying its suppliers beyond NVIDIA.

CEO Sam Altman has acquired more AI chips, a top priority for the company. He has publicly complained about the scarcity of graphics processing units, a market dominated by NVIDIA, which controls more than 80% of the global market for the chips best suited to run AI applications.

The effort to get more chips is tied to two major concerns Altman has identified: a shortage of the advanced processors that power OpenAI’s software and the “eye-watering” costs associated with running the hardware necessary to power its efforts and products.

Since 2020, OpenAI has developed its generative artificial intelligence technologies on a massive supercomputer constructed by Microsoft, one of its most prominent backers, that uses 10,000 NVIDIA graphics processing units (GPUs).

Running ChatGPT is very expensive for the company. Each query costs roughly 4 cents, according to an analysis from Bernstein analyst Stacy Rasgon. If ChatGPT queries grow to a tenth the scale of Google search, it would initially require roughly $48.1 billion worth of GPUs and about $16 billion worth of chips a year to keep operational.

CUSTOM CHIPS ERA

An effort to develop its own AI chips would put OpenAI among a small group of prominent tech players such as Alphabet’s Google and Amazon.com that have sought to take control over designing the chips that are fundamental to their businesses.

It needs to be made clear whether OpenAI will move ahead with a plan to build a custom chip. According to industry veterans, doing so would be a significant strategic initiative and a heavy investment that could cost hundreds of millions of dollars a year. Even if OpenAI committed resources to the task, it would not guarantee success.

An acquisition of a chip company could speed the process of building OpenAI’s chip – as it did for Amazon.com and its acquisition of Annapurna Labs in 2015.

OpenAI had considered the path to the point where it performed due diligence on a potential acquisition target, according to one of the people familiar with its plans.

The identity of the company OpenAI examined purchasing could not be learned.

Even if OpenAI goes ahead with plans for a custom chip – including an acquisition – the effort will likely take several years, leaving the company dependent on commercial providers like NVIDIA and Advanced Micro Devices.

Some big tech companies have built their processors for years with limited results. According to a Reuters report, meta’s custom chip effort has been beset with issues, leading the company to scrap some of its AI chips. The Facebook owner is now working on a newer chip that will span all types of AI work.

OpenAI’s main backer, Microsoft, is also developing a custom AI chip that OpenAI is testing, The Information has reported. The plans could signal further distancing between the two companies.

Demand for specialized AI chips has soared since the launch of ChatGPT last year. Specific chips, or AI accelerators, are necessary to train and run the latest generative AI technology. NVIDIA is one of the few chipmakers that produces proper AI chips and dominates the market.

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