Nvidia and AMD may face entirely new threat from $100 billion firm — will OpenAI end up buying Graphcore to build its own chips?

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Graphcore, the chipmaking startup that once counted Microsoft among its customers, may struggle to stay afloat unless it pulls in millions of dollars in financing within the next few months, according to its latest accounts.

Although the explosion of the AI industry means chips are in high-demand, Graphcore hasn’t been able to capitalize on this. The UK-based unicorn was once considered a key rival to the likes of Nvidia and AMD, having achieved a valuation of $2.5 billion in 2020 following its latest funding round. But due to lower sales from “key strategic customers”, revenues have fallen, according to Sifted

To underline its woes, the company once agreed to a deal with Microsoft, itself an investor in the company, this eventually fell through when the firm decided not to continue using Graphcore’s chips in its cloud computing systems.

Could OpenAI be Graphcore’s savior and shake up the market?

The company has less than a year now to raise capital to continue functioning as a healthy business, according to the Financial Times (FT), and is seeking another funding round, with discussions underway with potential investors. 

In light of the AI emergence, and with the chips market really hotting up OpenAI is rumured to be seeking to make its own AI chips, rather than run on the likes of Nvidia’s A100 GPUs to power its generative AI platforms like ChatGPT.

OpenAI has gone so far as to identify potential acquisition targets, reported Reuters, but hasn’t yet decided to move forward on any particular course of action. The main reason is that with chips in high demand, and only a handful currently mass-producing the components required to power AI workloads and LLMs, there’s a shortage.

The $100 million Silicon Valley giant has also considered building its own chip, working closely with other chipmakers – such as Nvidia –  as well as diversifying its supply beyond just Nvidia, which is the industry leader. The GPU maker has an 80% stranglehold on the market right now, although challengers are beginning to emerge, and innovative solutions are in the works.

Should OpenAI decide to invest in a chipmaking firm to build its own powerhouse to either guarantee a supply or crack open the market, it needn’t look further than Graphcore. There’s no guarantee it will, but perhaps an early investment may be on the cards as a first step into something that could potentially develop into a much bigger partnership.  

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The once bullish startup is now struggling to stay afloat, with OpenAI keen to get in the chips business.