OpenAI, Broadcom Partner to Enhance AI Infrastructure

Published Date : 14/10/2025 

OpenAI, the creator of ChatGPT, has signed a significant deal with Broadcom to purchase custom chips and networking equipment, aiming to enhance its artificial intelligence capabilities. This multiyear agreement is expected to generate substantial revenue for Broadcom and propel OpenAI's ambitious AI infrastructure plans. 

Broadcom Inc. shares surged after OpenAI agreed to buy the company’s custom chips and networking equipment in a multiyear deal, as part of its strategy to expand its artificial intelligence infrastructure. This agreement marks a significant step in OpenAI's efforts to secure the computing power needed to support its AI models and services.

In a pact announced on Monday, OpenAI agreed to purchase custom chips and networking components from Broadcom to power its AI services. OpenAI has already secured deals for data centers and chips that easily top $1 trillion, and the company plans to invest tens of billions more in Broadcom chips, according to sources familiar with the matter.

By customizing the processors, OpenAI aims to embed its AI knowledge directly into the hardware, unlocking new levels of capability and intelligence. The hardware rollout is expected to be completed by the end of 2029, according to the companies. For Broadcom, this move provides deeper access to the booming AI market. The agreement confirms an arrangement that Broadcom CEO Hock Tan had hinted at during an earnings call last month.

Investors responded positively, sending Broadcom shares up by as much as 11% on Monday, betting that the OpenAI alliance will generate hundreds of billions of dollars in new revenue for the chipmaker. However, the details of how OpenAI will finance the equipment are not yet clear. While OpenAI has demonstrated its ability to raise funding from investors, it is currently burning through significant cash and does not expect to be cash-flow positive until around the end of the decade.

OpenAI has been actively securing deals to ease constraints on computing power. Last month, Nvidia Corp., whose chips handle the majority of AI work, announced it would invest up to $100 billion in OpenAI to support new infrastructure, aiming for at least 10 GW of capacity. Just last week, OpenAI announced a pact to deploy 6 GW of Advanced Micro Devices Inc. processors over multiple years.

The rapid announcement of large projects by AI and cloud companies has raised concerns about the sustainability of AI spending. Many of these partnerships involve OpenAI, a fast-growing but unprofitable business. While purchasing chips from others, OpenAI is also developing its own semiconductors, primarily intended to handle the inference stage of running AI models.

There is no investment or stock component to the Broadcom deal, making it different from the agreements with Nvidia and AMD. An OpenAI spokesperson declined to comment on how the company will finance the chips, but the underlying idea is that more computing power will enable OpenAI to sell more services. A single gigawatt of AI computing capacity costs roughly $35 billion for the chips alone, with 10 GW totaling upwards of $350 billion. OpenAI is working to develop its own chip to reduce costs, and it is unclear what price Broadcom’s chips will command under the deal.

OpenAI might be following in the footsteps of Alphabet Inc.’s Google, which used Broadcom’s technology to develop its own chips and saw lower costs compared to other AI companies like Meta Platforms Inc. According to Bloomberg Intelligence analyst Mandeep Singh, Google’s success with Broadcom might have influenced OpenAI’s choice of chipmaker.

In announcing the agreement, OpenAI CEO Sam Altman said that his company has been working with Broadcom for 18 months. The startup is rethinking technology starting with the transistors and going all the way up to what happens when someone asks ChatGPT a question. “By being able to optimize across that entire stack, we can get huge efficiency gains, and that will lead to much better performance, faster models, cheaper models,” he said on a podcast released by his company.

When Tan referred to the agreement last month, he didn’t name the customer, though sources identified it as OpenAI. “If you do your own chips, you control your destiny,” Tan said in the podcast on Monday. Broadcom has increasingly been seen as a key beneficiary of AI spending, helping propel its share price this year. The stock was up 40% so far this year through Friday’s close, outpacing a 29% gain by the benchmark Philadelphia Stock Exchange Semiconductor Index. OpenAI, meanwhile, has garnered a $500 billion valuation, making it the world’s biggest startup by that measure.

By tapping Broadcom’s networking technology, OpenAI is hedging its bets. Broadcom’s Ethernet-based options compete with Nvidia’s proprietary technology. OpenAI will also be designing its own gear as part of its work on custom hardware, the startup said. Broadcom won’t be providing the data center capacity itself. Instead, it will deploy server racks with custom hardware to facilities run by either OpenAI or its cloud-computing partners.

A single gigawatt is about the capacity of a conventional nuclear power plant. Still, 10 GW of computing power alone isn’t enough to support OpenAI’s vision of achieving artificial general intelligence, said OpenAI co-founder and President Greg Brockman. “That is a drop in the bucket compared to where we need to go,” he said. Getting to the level under discussion isn’t going to happen quickly, said Charlie Kawwas, president of Broadcom’s semiconductor solutions group. “Take railroads — it took about a century to roll it out as critical infrastructure. If you take the internet, it took about 30 years,” he said. “This is not going to take five years.” 

Frequently Asked Questions (FAQS): 

Q: What is the significance of the OpenAI and Broadcom deal?

A: The deal is significant as it provides OpenAI with custom chips and networking equipment to enhance its AI infrastructure, which is crucial for developing and deploying advanced AI models and services.

Q: How much computing power will the deal provide?

A: The deal is expected to provide 10 gigawatts of computing power by the end of 2029, which is a substantial amount but still a small fraction of what OpenAI aims to achieve in the long term.

Q: How will this deal affect Broadcom's stock price?

A: Broadcom's stock price surged by as much as 11% on the day the deal was announced, reflecting investor confidence in the potential revenue and market access the agreement brings.

Q: What is the role of custom chips in this agreement?

A: Custom chips allow OpenAI to embed its AI knowledge directly into the hardware, leading to more efficient and powerful AI models and services.

Q: How does this deal compare to OpenAI's other partnerships?

A: This deal is different from OpenAI's partnerships with Nvidia and AMD as it does not involve any investment or stock component. It is a straightforward purchase of custom chips and networking components. 

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