Microsoft-backed OpenAI (MSFT), the maker of ChatGPT, is looking to reduce its reliance on chipmaker Nvidia (NVDA) by developing its first in-house artificial intelligence chip, according to Reuters. The company is finalizing the design and will send it to Taiwan Semiconductor Manufacturing Company (TSM) in the next few months for fabrication. This move is part of OpenAI’s ambitious goal to mass-produce its own AI chips by 2026.
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The new chip is viewed as a strategic tool to strengthen OpenAI’s negotiating leverage with other suppliers. After the initial chip, OpenAI’s engineers plan to develop more advanced processors with broader capabilities. If the initial production goes smoothly, OpenAI may test an alternative to Nvidia’s (NVDA) chips later this year. The company’s in-house team, which is led by Richard Ho, is working on the design by leveraging Ho’s experience from his previous role at Google (GOOGL).
OpenAI’s effort to produce its own AI chip is notable, especially since big tech companies like Microsoft and Meta (META) have faced challenges when trying to produce their own. Nevertheless, the company is collaborating with Broadcom (AVGO) to design the chip, which will initially be used on a limited scale to run AI models.
Is MSFT Stock a Buy?
Although you cannot directly invest in OpenAI, you can buy shares of Microsoft, which has a 49% stake in OpenAI. And according to analysts, Microsoft stock has a Strong Buy consensus rating among 32 Wall Street analysts. That rating is based on 29 Buys and three Holds assigned in the last three months. After a 1% increase in its share price over the past 12 months, the average MSFT price target of $510.90 implies 23.3% upside potential.
