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OpenAI has announced a collaboration with semiconductor giant Broadcom to develop its first in-house artificial intelligence processors, marking a pivotal step towards greater control over the hardware powering its generative AI models. The partnership, revealed on Monday, comes as the ChatGPT creator grapples with escalating compute demands and seeks to reduce reliance on third-party suppliers like Nvidia. Valued at potentially billions in development costs, the initiative underscores the intensifying race among tech firms to build custom silicon tailored for AI workloads.
The deal was confirmed in a joint statement, highlighting Broadcom’s expertise in custom application-specific integrated circuits (ASICs). OpenAI, which has seen its user base swell to 800 million weekly active users, aims to deploy these chips in its expanding data centres by late 2026. “As AI capabilities advance, so must the infrastructure supporting them,” said OpenAI CEO Sam Altman in a prepared remark. The move follows similar investments by rivals, including Meta’s $65 billion AI infrastructure spend and Amazon’s custom Trainium chips.
A Shift Towards Vertical Integration
This partnership builds on OpenAI’s broader strategy to secure supply chains amid global chip shortages and geopolitical tensions. Broadcom, a leader in networking and custom chips, will design processors optimised for training and inference of large language models, potentially cutting energy use by up to 30% compared to off-the-shelf GPUs. Early prototypes are expected to integrate with OpenAI’s existing Nvidia-based clusters, allowing for hybrid deployments.
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The announcement aligns with a flurry of AI hardware deals this month. Just last week, OpenAI finalised a multi-year agreement with AMD for 6 gigawatts of AI compute, granting the chipmaker a potential 10% equity stake. Separately, Nvidia pledged up to $100 billion in investments for OpenAI’s data-centre expansion, complete with millions of its Blackwell GPUs. These “circular” arrangements—where suppliers invest in customers who commit to buying their products—have drawn scrutiny from regulators concerned about market concentration.
Analysts view the Broadcom tie-up as a pragmatic response to surging demand. OpenAI’s revenue reached $4.3 billion in the first half of 2025, but compute costs have ballooned to $2.5 billion over the same period. Custom chips could lower long-term expenses, enabling cheaper API pricing and broader enterprise adoption in sectors like healthcare and finance.
Implications for the AI Ecosystem
The collaboration could accelerate Europe’s push for AI sovereignty. The European Commission, which unveiled a €1 billion “Apply AI Strategy” on 7 October, has earmarked funds for domestic chip production to counter US dominance. However, challenges persist: Developing ASICs requires 18-24 months and upfront investments exceeding $1 billion, with risks of delays from US export controls on advanced tech.
Privacy and energy concerns also shadow the boom. OpenAI’s custom processors will incorporate on-chip safeguards for data encryption, but critics argue that concentrated control over AI hardware could stifle innovation from smaller players.
As October draws to a close—with highlights including Perplexity’s free Comet AI browser launch and OpenAI’s quarterly report on disrupting malicious AI uses—the Broadcom deal signals a maturing AI landscape. For OpenAI, now valued at $500 billion, it represents not just technological ambition but a bid to future-proof its lead in the generative AI race. Observers will watch closely as prototypes emerge, potentially reshaping the $1 trillion AI infrastructure market.
