The companies are negotiating an agreement for Broadcom to finance the first phase of chip production, which would consume 1.3 GW of data center capacity and cost around $18 billion, according to The Information, citing an internal memo and two people involved in the talks.
The negotiations have hit a potential snag, as Broadcom has said it would finance the first phase only if Microsoft (NASDAQ:MSFT) agrees to buy roughly 40% of the chips, an OpenAI executive told colleagues in a memo last month. Under the proposed arrangement, Microsoft would install the chips in its data centers and then rent them back to OpenAI.
A purchase commitment from Microsoft would give Broadcom confidence it would get its money back, according to a person involved in the talks. However, Microsoft could choose not to buy OpenAI’s chips, which would change the financing terms for the project, the memo said.
Securing the financing is important for OpenAI because the ChatGPT maker has projected its operations will burn more than $200 billion through 2029. Using its own chips is central to OpenAI’s ambition to lower its server costs and improve its gross profit margins.
source https://www.investing.com/news/stock-market-news/broadcom-shares-slump-as-openais-18b-custom-chip-deal-hits-financing-snag-4669333
