OpenAI’s agreements to buy chips from Advanced Micro Devices Inc. and Broadcom Inc. are demonstrating how much room the artificial intelligence industry has to grow beyond top dog Nvidia Corp.
In the two weeks since AMD and OpenAI announced their blockbuster deal, the chipmaker’s stock has soared more than 42%. AMD also landed a major order from Oracle Corp. this week, further juicing its shares. Meanwhile, Broadcom unveiled its own agreement with OpenAI on Monday, sending its shares up 10% in a single session, their best performance since April.
But Nvidia is languishing, falling 3.1% since the AMD-OpenAI pact became public and underperforming the technology-heavy Nasdaq 100 Index, which is essentially flat.
“OpenAI clearly can’t rely just on Nvidia,” said Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, which has less than $70 million in assets under management, according to data compiled by Bloomberg. “They have to do deals with as many people as they can because they have a voracious appetite for computing power.”
Of course, none of this is meant to imply that Nvidia is losing its leadership position in AI infrastructure. The chip behemoth remains the 800-pound gorilla in the field, commanding roughly 95% of the total market, according to data from Bloomberg Intelligence.
But as the industry expands there’s increasing room for more winners. Investors are now piling into those opportunities, giving the stocks a taste of the momentum that has propelled Nvidia over the past few years.
“AMD and Broadcom already had their irons in the fire, but it does seem like they are getting more and more attention as more money is thrown into this area,” said Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management, which has $7 billion in assets under management and owns positions in Nvidia, AMD and Broadcom. “Nvidia remains at the hub of the AI ecosystem, everyone else is playing catchup. But that doesn’t mean it is the only company worth investing in.”
In many ways, OpenAI’s burst of spending is making the operator of ChatGPT the new kingmaker in tech.
“The industry really wants a substantive alternative to Nvidia, and it seems like AMD has arrived,” said Jason Tauber, co-manager of the Neuberger Berman Disrupters ETF , which has $29 million in assets under management and holds Nvidia, AMD and Broadcom. “The OpenAI deal was important validation that this is real.”
OpenAI is hardly the only company throwing around cash and chasing the AI wave. The tech industry is awash in billions of dollars in spending to build the infrastructure to power the technology, as many companies are worried that if they don’t keep up in the burgeoning arms race they’ll fall behind their competitors.
But while these expenditures are a boon for companies like AMD, Broadcom and Nvidia, they’re also triggering concerns about the health of the AI trade that’s lifted the broader market in the last few years.
As long as demand continues to outstrip supply, which is the driving force behind many of the deals struck lately, there should be room for multiple players in the space. The trouble is OpenAI is closely held, so it doesn’t have to answer to investors or file quarterly updates on its financial health. As a result, no one really knows how deep its pockets are or when things will start to get tight as it pays up on the more than $1 trillion of commitments it has made through 2030.
“Everyone should remain highly skeptical about whether OpenAI can deliver on the extraordinary obligations it has taken on,” Michael O’Rourke, chief market strategist at Jonestrading, wrote in a note to clients on Wednesday. “Considering all the companies involved, each carries significant exposure to OpenAI, and all will face repercussions if problems emerge down the line.”
That’s a risk investors will need to watch. In the meantime, as long as the spigot of AI cash keeps flowing, Nvidia’s competitors like AMD and Broadcom will continue to bring opportunities to diversify away from the biggest player.
“The sense of competition and other companies winning deals is very much welcome,” Hennion & Walsh’s Mahn said. “Investors now have more opportunity to not be concentrated in any single name. They can diversify into other chipmakers.”
Nintendo Co. has asked suppliers to produce as many as 25 million units of the Switch 2 by the end of March 2026, setting the company up for record first-year sales of a console that’s already reached high-water marks for the global gaming sector.
With assistance from Subrat Patnaik and David Watkins.
This article was generated from an automated news agency feed without modifications to text.
