OpenAI’s massive custom chip deal with Broadcom is reportedly facing financing difficulties

OpenAI’s plan to purchase 10 gigawatts’ worth of custom AI chips from Broadcom, a deal announced in October, is running into some financial difficulties, per The Information.

The report, citing an internal memo and people involved in the talks, says that the custom chip designer is being asked to finance the initial $18 billion in chip production, and is only willing to do so if Microsoft buys 40% of these processors or OpenAI finds other buyers.

Shares of Broadcom sank to session lows following this news, but pared most of that retreat thereafter.

Microsoft recently revised its agreement with the ChatGPT maker to end revenue-sharing payments from the former to the latter. That’s seemingly a signal of the tech behemoth’s reluctance to contribute as much to OpenAI’s massive cash burn going forward.

All in all, it appears as though Broadcom is willing to meet OpenAI more than halfway in a bid to make sure the parties can secure capacity for these chips to be produced. The report concludes:

“Broadcom had long insisted that OpenAI put up one dollar of its own for every dollar Broadcom provided in financing, a typical arrangement to limit the chip vendor’s risks. That requirement had become a sticking point in the talks, according to the memo and an executive involved in the talks.

But Broadcom recently decided to relax that demand and invest more capital up-front than OpenAI, breaking from Broadcom’s ‘long-held hard-line requirement,’ the OpenAI memo said.”