Sam Altman t semiconductors: 5 questions surrounding a disproportionate project

Sam Altman, boss of OpenAI, is seeking to mobilize between 5,000 and 7,000 billion dollars to transform the semiconductor industry and anticipate the enormous needs linked to artificial intelligence. A record amount. Explanations in five questions.

How is the project unique?

OpenAI, the company led by Sam Altman, shook up tech by launching ChatGPT, its chatbot powered by generative AI, in November 2022. Its ambitions do not stop there. The company located in San Francisco aims to build artificial general intelligence, that is to say an AI whose capabilities exceed those of humans.

Such an undertaking requires gigantic computing capacity and therefore tens of thousands of GPUs, the graphics chips used to train AI models. But these extremely complex semiconductors cost several tens of thousands of dollars. Only a handful of companies in the world are capable of manufacturing them, including Taiwanese TSMC. They cannot be manufactured only on machines themselves worth hundreds of millions of dollars.

Sam Altman therefore decided to take matters into his own hands, by investing in new factories capable of m manufacturing these graphics chips. Its initiative goes beyond OpenAI: it is about transforming the global chip industry, to anticipate the immense needs of AI. According to Wall Street Journal, the manager is discussing with several investors, including the government of the United Arab Emirates, to try to bring together we’re crazy necessary to accomplish this project. The amount at stake? Between 5,000 and 7,000 billion dollars, according to the American newspaper, which underlines the “significant obstacles” of the project with a certain sense of euphemism given the size totally unprecedented fundraising.

Why is Sam Altman looking for so much money?

Even spread over several years, the total amount of investment hoped for by Sam Altman is undoubtedly what will make the biggest impression. With 5,000 to 7,000 billion dollars (7% of global GDP 2023!), the entrepreneur plans to devote five to seven times more money to the electronic chip sector than what has been injected over the last ten years, i.e. “only » 943 billion dollars according to the firm IC Insight.

Does such an acceleration make sense? Observing the semiconductor market provides Sam Altman with arguments to defend his case. The proportions have nothing to do with it, but the champions of chip manufacturing have already been considerably increasing their investments for several years. Spending on new factories was almost three times higher in 2023 than in 2013.

Having become one of the public figures of artificial intelligence, Sam Altman can also promise the chip sector a new lucrative outlet: computer models called to change the world need chips optimized at the time of their design, but also to function . However, if artificial intelligence interferes, as some predict, in all areas of society, AI companies should be able to foot the bill for chip manufacturers.

What future for the chip market?

So far, the collapse of the semiconductor market in 2023 (-12%) has not dampened analysts’ enthusiasm. The McKinsey firm predicted in 2022 a doubling of sales by 2030, to more than 1,000 billion dollars per year. At $543 billion, fiscal 2023 is a long way from that. But the rebound looks set to be even more dynamic. According to Gartner, the market is expected to be worth around $721 billion by 2025.

In fact, there is no shortage of opportunities in a world increasingly dependent on electronics. Computers and smartphones of course, but also refrigerators, air conditioners, automobiles and all kinds of objects are full of chips. In this context, industrial customers no longer want to experience the shortage that paralyzed many of their factories in 2021.

One sector in particular is doing well: that of graphics chips, valuable for accelerating the calculations necessary for training and using AI models. Industry giants, including AMD and Intel, followed in the footsteps of Nvidia, which still reigns supreme in this market. This year, AMD hopes that its MI300 sales, its response with Nvidia’s H100 chips, will reach $3.5 billion.

Does Sam Altman’s initiative serve America’s interests?

The great powers have all identified the need to increase chip production to support AI and protect against geopolitical hazards, in particular Taiwan’s vulnerability to China.

It is on this island that TSMC produces most of the sophisticated chips on the planet. Sam Altman’s initiative, if it comes to fruition, will contribute to efforts to repatriate chip production to the West, particularly to the United States.

In addition to concerted strategies between Western countries to delay China’s technological progress, recent years have seen a multitude of “chip acts” implemented by countries to attract chip giants to their soil ( 43 billion euros in Europe,52 billion dollars in the United States). Asia has not stood idly by. To keep their industrialists tempted by the tax credits of the Biden administration, Taipei, Seoul and Tokyo have drawn up their own aid plans. TSMC comes to announce a new factory in Japan.

And in fact, factories will emerge. Intel will invest 30 billion euros in Magdeburg, in East Germany. Even if it is in the United States that the “reshoring” is most impressive: the South Korean Samsung has committed 17 billion dollars to Texas; TSMC on $40 billion in Arizona; Intel on 20 billion in Phoenix, etc. In total, the Semiconductor Industry ociation (SIA) identified in January nearly $190 billion in projects since 2020.

Although gigantic by conventional standards, these investments would be totally eclipsed by Sam Altman’s $7 trillion plan. And yet, current projects are falling behind schedule as we saw recently for that of TSMC in Arizona, which will only be operational in 2028, instead of 2026.

While China is already considering 5 nanometer chips (according to the “Financial Times”), Sam Altman’s initiative could help the West accelerate – he wants to build its factories in the United States with TSMC, according to the “Wall Street Journal”. However, his project will not escape the shortage of qualified workers, at the origin of the current delays.

Private investments are accompanied by public policy considerations. In a tweet from February 7, Sam Altman says “OpenAI is ready to help!” » the chip industry. Proof that a project of this magnitude will not be carried out without industrial partners, nor without the American government.

Is such fundraising possible?

5,000 to 7,000 billion dollars, mainly in debt… From the memory of an investor, the amounts mentioned by Sam Altman are completely unprecedented. The father of OpenAI began to probe the “deep pockets” of the planet, such as Sheikh Tahnoun bin Zayed al Nahyan who has his hands on the largest sovereign wealth fund in Abu Dhabi, Adia ($984 billion). He would also have met Masayoshi Son, the boss of SoftBank. The problem is that the amounts mentioned are disproportionate to the funding that can be mobilized.

The market capitalization of Nvidia – more than 1,720 billion dollars – but also the explosion in recent days of the stock price of the British chip designer Arm thanks to AI demand, show that investors have their finger on the trigger to finance these new technologies. But on the markets, in 2023, American companies raised a total of 1,440 billion dollars in debts, according to the Securities Industry and Financial Markets ociation. At its peak in recent years, the debt market provided $2.275 trillion in debt (in 2020). The steps actions, they bring between 100 and 400 billion dollars to American companies, depending on the year.

THE sovereign funds, which, according to figures from the Global SWF, manage some $11.4 trillion, invested $125 billion last year in all sectors and countries combined. Suffice it to say that their possible participation in OpenAI’s fundraising may be modest. In addition, they have a logic of global diversification and cannot be too exposed to one sector, even if some like Mubadala, the Abu Dhabi fund for example, clearly have an investment bias towards “tech”.

On the side of private equity funds, the strike force seems, here too, weak in relation to the needs mentioned. SoftBank announced last May that its Vision Fund technology fund had raised $93 billion, making it one of the largest private equity funds in the world. The industry certainly manages nearly $6,000 billion in private equity ets and €2,680 billion in venture ets, according to Preqin. However, its cash “reserve”, if it grows, is limited with regard to Sam Altman’s objectives: it does not exceed 2,300 billion dollars. Like sovereign wealth funds, fund managers will not mobilize all their capacity solely for the views of the boss of OpenAI.

Florian Dèbes, Hortense Goulard, Nicolas Madelaine, Nessim Ait Kacimi, Sophie Rolland, Anne Drif

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