OpenAI, Broadcom Forge Multibillion-Dollar Chip-Development Deal

OpenAI and Broadcom are working together to develop and deploy 10 gigawatts of custom AI chips and computing systems over the next four years, a high-profile partnership aimed at satisfying some of the startup’s immense computing needs.

OpenAI plans to design its own graphics processing units, or GPUs, which will allow it to integrate what it has learned from developing powerful artificial-intellligence models into the hardware that underpins future systems. As part of the agreement announced Monday, the chips will be co-developed by OpenAI and Broadcom and deployed by the chip company starting in the second half of next year.

The new agreement will be worth multiple billions of dollars, people familiar with the matter said. The companies didn’t disclose financial terms.

Broadcom shares rose nearly 10% in morning trading.

Broadcom specializes in designing custom AI chips that are specifically tailored to certain artificial-intellligence applications. It began working with OpenAI on creating a custom chip 18 months ago, and the companies broadened their partnership to include work on related components, including server racks and networking equipment.

The new racks will rely on Ethernet technology and other connectivity from Broadcom, the two companies said. They will be deployed in data centers OpenAI owns as well as those operated by third parties, the people familiar with the matter said.

The massive deal brings the total scale of computing capacity OpenAI has agreed to buy from chip giants Broadcom, Nvidia and Advanced Micro Devices to 26 gigawatts, enough to meet the summer electricity needs of New York City more than two times over.

The startup will have to spend hundreds of billions of dollars to pay for these deals . It expects to generate $13 billion in revenue this year, meaning that it will have to increase sales at an exponential rate to make good on its computing bills.

With a $500 billion valuation, OpenAI is the world’s most valuable startup and has launched some of the most popular AI tools, including ChatGPT and video-generating software Sora . It has more than 800 million weekly active users.

Broadcom has been bolstered by its work helping tech companies manufacture custom chips that speed up artificial-intelligence computations. Shares are up more than 80% in the past six months, and its market capitalization has increased to more than $1.5 trillion.

Open AI Chief Executive Sam Altman and Greg Brockman , its president and the executive responsible for building out infrastructure, have said they don’t have enough computing power at their disposal. Demand for AI products is rising at a rapid clip, and the two men have said they are hoping to build giant new data centers across the world to keep up.

OpenAI’s deals with chip and cloud companies in the past few months have helped fuel a global rally in tech stocks. Each agreement has raised the already high expectations set by Altman in describing the seemingly infinite amount of compute needed to bring forth the AI revolution. The deals have surprised some competitors who have far more modest projections of their computing costs.

Altman recently told employees that OpenAI wanted to build 250 gigawatts of new computing capacity by 2033, according to people familiar with the matter, a plan that would cost over $10 trillion by today’s standards. He has said that OpenAI would have to create new financing tools to help fund this massive build-out but hasn’t shared many details on what that would look like.

The tech site Sources earlier reported Altman’s computing target.

OpenAI’s partners are making a huge bet that Altman’s vision for a world remade by AI will pan out and that the startup will be the main winner of this technological shift. In September, consultants at Bain & Co. estimated the wave of AI infrastructure spending will require $2 trillion in annual AI revenue by 2030—more than the combined 2024 revenue of Amazon.com , Apple , Alphabet , Microsoft , Meta Platforms and Nvidia.

Write to Berber Jin at berber.jin@wsj.com and Robbie Whelan at robbie.whelan@wsj.com