Huang Surprised by AMD’s Alleged OpenAI Stake Offer

Nvidia CEO Jensen Huang expressed surprise Wednesday at Advanced Micro Devices’ (AMD) strategic move to offer OpenAI a significant stake in their company as part of a recently announced multibillion-dollar partnership.

“It’s imaginative, it’s unique and surprising, considering they were so excited about their next generation product,” Huang stated during an interview on CNBC’s “Squawk Box.” “I’m surprised that they would give away 10% of the company before they even built it. And so anyhow, it’s clever, I guess.” Huang’s comments highlight the unconventional nature of the deal and its potential implications for the competitive landscape in the AI chip market.

The agreement between OpenAI and AMD, finalized earlier this week, involves OpenAI’s commitment to purchase 6 gigawatts worth of AMD’s computing power over several years, including the highly anticipated MI450 series. In exchange, OpenAI will receive warrants for up to 160 million AMD shares, with vesting contingent on deployment volume and AMD’s share price performance. This arrangement, if fully exercised, would grant OpenAI an approximate 10% ownership stake in AMD.

This bold maneuver directly challenges Nvidia’s established dominance in the AI chip industry, a sector where AMD has been actively striving to gain market share. Beyond AMD, cloud providers are also emerging as contenders, developing their own custom silicon to meet the unique demands of AI workloads. The OpenAI-AMD partnership represents a significant strategic alliance aimed at diversifying the AI infrastructure landscape.

In contrast to AMD’s partnership model, Nvidia announced plans last month to invest up to $100 billion directly into OpenAI over the next decade. This investment aims to support OpenAI’s development and deployment of Nvidia-powered systems requiring 10 gigawatts of power – an amount Huang equated to between 4 million and 5 million graphics processing units (GPUs). This direct investment underscores Nvidia’s strategic intent to maintain a close relationship with a key player in the AI development space.

Huang emphasized a key differentiator between Nvidia’s investment strategy and AMD’s partnership: Nvidia is able to sell directly to OpenAI, fostering a more traditional vendor-customer relationship. This direct-sale model allows Nvidia to maintain greater control over its technology deployment and revenue streams related to OpenAI’s rapidly evolving AI initiatives.

The Nvidia investment in OpenAI has also fueled concerns about the potentially “circular nature” of certain AI infrastructure deals. Critics have raised questions regarding the financial mechanisms driving these large-scale investments and the potential for self-serving arrangements within the industry.

When questioned about OpenAI’s funding strategy for the Nvidia deal, Huang acknowledged the company’s current financial constraints: “They don’t have the money yet.”

“They’re going to have to raise that money through, first of all, their revenues, which is growing exponentially, equity or debt,” Huang elaborated. “They gave us the opportunity to invest alongside other investors when the time comes.” This suggests a phased investment approach, relying on OpenAI’s escalating revenues and potential future fundraising rounds to meet its financial commitments.

Huang concluded by reflecting on Nvidia’s past investment in OpenAI, stating, “My only regret is that we didn’t invest more.” This sentiment reinforces Nvidia’s strong belief in the long-term potential of OpenAI and the strategic importance of its continued partnership.