Sam Altman wants to reshape the semiconductor industry, what does it take besides trillions of dollars?

Altman's new project focuses on increasing global chip manufacturing capacity, and he is in talks with investors, including the UAE government. Ultraman needs to raise $5 trillion to $7 trillion, while Microsoft and Apple have a combined market capitalization of about $6 trillion.

There are uncertainties, including how to find engineers to operate the new plant, how to get equipment to fill the plant, and how to get enough orders to justify the plant.

Nvidia controls about 80% of the AI chip market, and Sam Altman, the "father of ChatGPT," seeks to reshape the global semiconductor industry.

OpenAI CEO Sam Altman wants to seek $5 trillion-$7 trillion in funding for AI chip projects to increase global chip manufacturing capacity. He hopes to build dozens of chip manufacturing plants in the coming years. But raising trillions of dollars, or the easier part of Ultraman's chip plan, also faces challenges such as talent acquisition, cyclical markets and a lack of viable chipmakers.

And Nvidia CEO Jensen Huang quipped that $7 trillion "can obviously buy all the GPUs." A few days ago, at the World Government Summit in Dubai, Huang said that due to the expected advances in computing technology, the cost of developing artificial intelligence will not be as much as Altman wants to raise. "You can't take it for granted that you're going to buy more computers. "You also have to assume that computers are going to get faster, so you won't need as much of the total." ”

Raising trillions of dollars to reshape the global semiconductor industry

In the past year's AI boom, Nvidia's GPUs (graphics processing units) have been in the limelight, powering large models for OpenAI, Meta, and other well-funded startups. Meta CEO Mark Zuckerberg said last month that the company plans to have about 350,000 Nvidia's flagship H100 processors by the end of this year.

Currently, Nvidia controls about 80% of the AI chip market, and Altman is trying to change that.

Altman has long been concerned about the supply and demand of AI chips, and he has said that the limitations of AI chips have hindered the development of OpenAI, often complaining that there are not enough GPUs to support OpenAI's exploration of general artificial intelligence, and also complaining about the cost of Nvidia chips.

Altman said on social media X on February 8 that the world needs more AI infrastructure, including fab capacity, energy, data centers, etc., more than people currently plan to build. "Building large-scale AI infrastructure and resilient supply chains is critical to economic competitiveness. OpenAI will try to help. ”

Altman's new project, which is aimed at increasing global chip manufacturing capacity, is in talks with investors, including the UAE government. According to the Wall Street Journal, a person familiar with the matter said that Altman needs to raise $5 trillion-7 trillion in funding. Altman has also met in recent weeks with U.S. Commerce Secretary Gina Raimondo and other U.S. officials to discuss his plans.

Such an investment would dwarf the size of the current global semiconductor industry, which last year sold $527 billion in chips and $100 billion in semiconductor manufacturing equipment. By corporate finance standards, Altman is also discussing ridiculously large amounts, even larger than the national debt of some major economies and large sovereign wealth funds. As the two most valuable companies in the United States, Microsoft and Apple have a combined market capitalization of about $6 trillion.

It is planned to build dozens of chip factories in the coming years

Altman is interested in chip manufacturing. In 2018, Altman personally invested in Rain Neuromorphics, an artificial intelligence chip startup located near OpenAI's headquarters in San Francisco. In 2019, OpenAI signed a letter of intent to spend $51 million on Rain's chips.

Today, Ultraman has even greater ambitions. In an effort to reshape the global semiconductor industry, Altman is pushing for a collaboration between OpenAI, investors, chipmakers and power suppliers as part of the talks, which will jointly fund the construction of chip foundries that will then be operated by existing chipmakers, some people familiar with the matter said. OpenAI will be an important customer for the new factory.

Among the Middle Eastern investors that Altman has wooed is one of Abu Dhabi's richest and most influential figures, Sheikh Tanu bin Zayed Al Nahyan. He is the UAE's National Security Advisor, Chairman of the Abu Dhabi Investment Authority, ADQ (Abu Dhabi Development Holdings Limited), Abu Dhabi's third largest sovereign wealth fund, and Chairman of Abu Dhabi's artificial intelligence company G42, which also has partnerships with Microsoft and OpenAI.

Altman has revealed his plans to Microsoft CEO Satya Nadella and CTO Kevin Scott. He also met with SoftBank CEO Masayoshi Son, as well as representatives of chip manufacturing companies such as TSMC to discuss cooperation. According to the Wall Street Journal, people familiar with the matter said that during negotiations with TSMC, Altman had said that he hoped to build dozens of chip manufacturing plants in the next few years. His vision is to raise money from Middle Eastern investors for TSMC to build and operate the plants.

However, Altman's negotiations are still in their early stages, and the full list of potential investors is not yet known, and the negotiations may last for years and may not be successful in the end.

Facing challenges such as talent, cyclical fluctuations, etc

Raising trillions of dollars may be the easier part of Altman's chip plan, but he also faces challenges such as talent acquisition, cyclical markets and a lack of viable chipmakers.

Chip manufacturing is a capital-intensive industry, and it usually costs at least $10 billion to build a cutting-edge chip factory. But money is not the only factor for success. The chip industry is one of the most intricate industries in the world, with sharp cyclical fluctuations, and companies are cautious about aggressive expansion. Some chip companies faltered during the industry downturn, while others halted cutting-edge chip development due to high costs and risks. It took decades for the world's most advanced chipmakers to reach their current heights. According to the Wall Street Journal, at present, there are only three companies in the world that can produce the most cutting-edge chips on a large scale, namely TSMC, Samsung Electronics and Intel. Many large companies, including Nvidia, design their own chips but outsource chip production to companies like TSMC.

Industry executives also said there are uncertainties, including how to find engineers to operate a new batch of factories, how to get equipment to fill factories, and some chip-making equipment has a lead time of about two years. In addition, there is uncertainty as to how to get enough orders to justify these factories. Even if a large number of new chip factories are built, it will not necessarily solve the shortage of AI chips that Altman has encountered recently. According to the Wall Street Journal, the biggest bottleneck in the production of Nvidia's AI chips is packaging.

The challenges of manufacturing chips are different from those faced by Altman in his early days of entrepreneurship involving computers and software. Jimmy Goodrich, a semiconductor industry expert and senior adviser at Rand Corp., a U.S. think tank, said that in software, anything is possible, and it's just a matter of money and programming. But in the field of hard technology, where the laws of physics have to be dealt with, and real-world and engineering challenges have to be considered, it's hard to do.

At the same time, chip industry insiders said that if Ultraman's plan is successful, the market may be oversupplied and prices will fall, resulting in companies operating factories below capacity. Due to high fixed costs, this will sound the financial death knell for the chip industry.