The massive deal could mark a major turning point in the AI chip race.
Transcript:
Caroline Woods: Joining me now, Daniel Newman, CEO of the Futurum Group. Daniel, great to have you back.
Daniel Newman: Thanks for having me, Caroline.
Caroline Woods: All right. Let’s start with the big headline of this morning. And that’s this new partnership between AMD and OpenAI. Talk to me about the significance. What’s your take? What does it mean for the AI infrastructure race?
Daniel Newman: It means the race is still on and that there hasn’t been a determined winner. One of my big themes has been this it’s not zero sum. There’s so many people out there. There’s the NVIDIA Bulls that think everything’s going to be Nvidia. And then there’s been those that are like, Oh, custom. It’s going to be the chips that are made by Google. They’re TPUs or it’s going to be Amazon and it’s trainium chips or it’s going to be some version of that by Broadcom. And then there’s the others that are saying AMD is going to come in the market and out price. And I mean, if there’s nothing that we learned over the last few weeks from this kind of energy capacity trade, you’ve heard these names like Cypher and iron. There are these companies that are bit miners that have turned into GPU capacity of course. And we don’t have enough compute. We don’t have enough energy, we don’t have enough compute. And basically, Sam Altman seems to be hedging. He’s hedging. He’s doing deals with Broadcom. He’s doing deals with AMD. He’s doing deals with NVIDIA. And so everybody’s in the game right now. And as long as we know that the compute capacity requirements are going to keep growing, all these companies that are playing. Have a great opportunity to see more upside.
Caroline Woods: So this is the moment for AMD to really challenge Nvidia’s dominance?
Daniel Newman: This is a complicated deal if you look at how it sits compared to Nvidia. Nvidia wrote a check, Nvidia wrote a check and said basically. And of course, no specific round tripping. It didn’t say you had to buy NVIDIA. And everyone thought, well, OK, it’s a circular thing. And now you’ve got a very different structural deal. You’ve got OpenAI basically committing to use Helios. That’s the RAC scale, the biggest, you know, my 450. That’s the top end AMD GPU cluster and RAC scale systems. And they’re going to build out and then they’re going to get stock warrants. They’re going to basically get warrants. And they’re basically as AMD’s valuation grows OpenAI’s the value of the stock. They’re going to get the grants they’re going to get for building out with AMD go up. So it’s a really interesting, very unique and different way to approach this. And the most interesting thing may be that Nvidia could end up owning part of AMD because of its ownership now in OpenAI. So there is a big circle going on, but that doesn’t mean, the demand isn’t real, do you.
Caroline Woods: When we think about the valuation of OpenAI just hit, what, $500 billion. Do you look at that as, as justified? Or do you look at it and think another bubble could be forming?
Daniel Newman: This one I struggle with when you know that OpenAI’s valuation surpasses so many companies, very legitimate companies that lead industries, entire industries, you start to say, Wow, you know, is there a bubble forming. But then at the same time, when you see this insatiable demand, this insatiable need for AI, you see how fast the revenue is growing and you look at the alternatives. I shared something on X the other day, and I said, I think OpenAI is setting up to be the first trillion IPO. I think it will be dollar trillion when it goes public. And it’s all based on what people believe it can do in the future. And it just shows how much more the market is forward looking. Other industries still have so many questions about what their long term looks like. I seems to be the one industry that everybody agrees that there’s going to be this incredible demand, this incredible scale. But there is exuberance right now, for sure. There’s a frothiness in the market that I think everybody has to at least be realistic that there could be a big pullback at some point.
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