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OpenAI is rolling out data centres like nobody’s business. In the process, Sam Altman’s company is constructing something else too: a corporate empire of mutual dependencies. A tie-up with chipmaker AMD adds a new strand to the spider’s web.
The maker of ChatGPT inked a deal on Monday that looks quite like the one it struck last month with Nvidia, the leading AI chipmaker and AMD’s main rival. Both are best understood as long-term customer relationships: OpenAI commits to buying high-end silicon by the truckload and the chipmakers get the promise of future revenue.
In both cases, there’s an extra sweetener thrown in for OpenAI. Nvidia is buying up to $100bn of Altman’s company over time, providing OpenAI with cash. AMD will give OpenAI warrants entitling it to 10 per cent of the company if it meets certain targets. Should all go to plan, including AMD stock hitting $600 a share, Altman’s company will own a $96bn stake, for which it will pay just $1.6mn.
AMD’s giveaway is more generous than Nvidia’s. And it isn’t hard to see why: the company is a distant second in the AI race. OpenAI’s plans might theoretically generate up to $200bn in chip sales for AMD, equivalent to seven years of its revenue. Hopefully when other companies see OpenAI using its new MI450 chips, they’ll want some too. AMD’s market capitalisation rose more than $80bn within minutes of the arrangement being announced.
Step back, and the cat’s cradle Altman and his peers are creating is elaborate. Nvidia also owns a stake in CoreWeave, a data centre company that also counts OpenAI as a shareholder. Microsoft, meanwhile, is an early investor in OpenAI. Altman’s company also partners with Google, as a customer but also as a supplier of sorts, since its models are available on Google’s cloud platform.
This is a new version of an old corporate habit. Japanese companies, for example, have a long history of interlocking shareholdings between customers and suppliers, though these are in some cases being unwound to free up capital. German financial firms used to take stakes in local companies — think of Deutsche Bank’s stake in carmaker Daimler. Merrill Lynch, now Bank of America, once held a big stake in Bloomberg LP.
While not exactly orthodox, this isn’t all bad. The idea that a shareholding is somehow necessary to “further align strategic interests” is corporate hogwash, but there is something to be said for suppliers and customers working in a non-antagonistic way. Automaker Chrysler set out in the 1990s to copy the collaborative spirit —but not the cross-shareholding — of Japan’s “keiretsu” model by working with suppliers rather than against them. For a while it became the US’s most profitable big carmaker.
The problem with so-called win-win arrangements is that if things go wrong, they can become lose-lose. The more companies depend on OpenAI’s growth, and the more their own businesses are geared towards serving their most important customer, the more they have at stake —both in profit and share price — if that growth stops. For that reason, Altman’s empire-building looks shrewd. Securing OpenAI’s success is becoming quite literally everybody’s business.