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Broadcom Demands Microsoft Commit to Buy 40% of OpenAI's Nexus Chip Output Before Investing
OpenAI's push to develop its own chips and break free from NVIDIA's hold is now facing a serious funding crunch. The "Nexus" chip project, once seen as a strong collaboration, has hit a deadlock over financing terms. Chip giant Broadcom has set a strict condition: it will only invest real money if Microsoft commits to buying 40% of the initial production output.
This ambitious project, called Nexus, aims to build a 10-gigawatt computing cluster by 2030, consuming as much power as five Hoover Dams. The goal is clear: cut server costs by 20% to 30% through custom chips and ease over $200 billion in operational funding pressures before 2029. But the first phase alone, requiring 1.3 gigawatts, is estimated at $18 billion, and total chip production costs for the entire project are expected to soar to $180 billion.
Broadcom's caution is understandable. Although Microsoft has reserved data center space, it hasn't signed a formal purchase agreement yet. Broadcom believes only Microsoft's top-tier creditworthiness and operational experience can make this astronomical investment pay off. For Broadcom, tying Microsoft to the deal is a safety valve, but for OpenAI, it adds another layer of complex uncertainty.
Internal memos show the partnership agreement already includes a risk contingency: if Microsoft fails to meet the purchase target, OpenAI must find its own buyers. More worrying, OpenAI has a history of similar promises that fizzled out, such as a previously reported $100 billion data center collaboration with NVIDIA that never materialized.
In today's complex competitive landscape, Microsoft no longer pays revenue shares to OpenAI and has lost exclusive technology rights. Meanwhile, OpenAI has started integrating its models into Amazon AWS to diversify. In this delicate alliance game, whether Microsoft is willing to shoulder the huge procurement risk for OpenAI's self-developed chip dream will directly determine if the Nexus project takes off or becomes just another expensive paper plan.
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OpenAI's push to develop its own chips and break free from NVIDIA's hold is now facing a serious funding crunch. The "Nexus" chip project, once seen as a strong collaboration, has hit a deadlock over financing terms. Chip giant Broadcom has set a strict condition: it will only invest real money if Microsoft commits to buying 40% of the initial production output.
This ambitious project, called Nexus, aims to build a 10-gigawatt computing cluster by 2030, consuming as much power as five Hoover Dams. The goal is clear: cut server costs by 20% to 30% through custom chips and ease over $200 billion in operational funding pressures before 2029. But the first phase alone, requiring 1.3 gigawatts, is estimated at $18 billion, and total chip production costs for the entire project are expected to soar to $180 billion.
Broadcom's caution is understandable. Although Microsoft has reserved data center space, it hasn't signed a formal purchase agreement yet. Broadcom believes only Microsoft's top-tier creditworthiness and operational experience can make this astronomical investment pay off. For Broadcom, tying Microsoft to the deal is a safety valve, but for OpenAI, it adds another layer of complex uncertainty.
Internal memos show the partnership agreement already includes a risk contingency: if Microsoft fails to meet the purchase target, OpenAI must find its own buyers. More worrying, OpenAI has a history of similar promises that fizzled out, such as a previously reported $100 billion data center collaboration with NVIDIA that never materialized.
In today's complex competitive landscape, Microsoft no longer pays revenue shares to OpenAI and has lost exclusive technology rights. Meanwhile, OpenAI has started integrating its models into Amazon AWS to diversify. In this delicate alliance game, whether Microsoft is willing to shoulder the huge procurement risk for OpenAI's self-developed chip dream will directly determine if the Nexus project takes off or becomes just another expensive paper plan.
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