The edges of companies that make AI and those that make AI infrastructure are blurring as the industry coalesces into a handful of corporate mega-blobs linked by investments, partnerships and shared supply chains.
Why it matters: The AI world is moving into a new era of corporate entanglement with OpenAI's latest megadeal, a "tens of billions of dollars" agreement with AMD that has OpenAI buying mountains of AMD's GPU chips and taking up to a 10% stake in the firm.
How it works: AI's leading companies still compete — sorta. They also work together at a large scale in increasingly esoteric ways.
You could call that an ecosystem. You could also call it, as AI critics have, a shell game.
- Either way, the AI business is beginning to function like one giant dollar-eating, energy-sucking entity that makes chips, trains models and sketches utopias to justify its runaway costs.
- All this is happening well before the takeoff of a "superintelligence" that always seems to lie just over the next ridge.
What they're saying: "We are in a phase of the build-out where the entire industry's got to come together and everybody's going to do super well," OpenAI CEO Sam Altman told the Wall Street Journal as the AMD deal was unveiled.
- "You'll see this on chips. You'll see this on data centers. You'll see this lower down the supply chain."
Indeed, everyone seems to be singing "Come Together" with Altman and OpenAI.
- Nvidia announced a massive deal last month in which the chipmaker plans to invest up to $100 billion in OpenAI in stages, with OpenAI using the money to build data centers chock full of Nvidia systems.
- Nvidia also recently cut a deal with Intel to invest $5 billion in the troubled U.S. chipmaker.
- OpenAI has pulled in additional billions from Oracle and SoftBank to fund its ambitious Stargate data center project in the U.S., with more billions from the UAE to fund a data center in Abu Dhabi.
- These partnerships all follow OpenAI's foundational relationship with Microsoft, forged in the company's early days and restructured last month.
Meanwhile, OpenAI competitor Anthropic has taken big investments from both Google and Amazon.
- Oh, but OpenAI itself also has a deal for services from Google Cloud.
- And Microsoft is powering some of its products with AI from Anthropic.
Between the lines: The U.S. government itself has become a stakeholder in the AI mega-blob.
- The Biden administration and Congress had already gotten into the business of funding domestic chipmaking via the CHIPS Act.
- Then the Trump administration decided that in return for CHIPS grants aimed at helping once-dominant U.S. chipmaker Intel recover its manufacturing capacity, the company should give the U.S. 10% ownership.
Flashback: Historically, as with the build-out of railroads in the late 19th century, eras of massive growth and speculation have led to corruption and scandal that then provokes regulation and prosecution.
- But today, the government has become one more player in the game, and the fast-dealing, anything-goes climate of Trump's second term makes a Progressive Era-style pushback look unlikely for now.
Yes, but: The AI boom's massive dollar amounts and hints of investment circularity, where company A supplies company B with the cash to buy A's products, create their own kind of risk.
- Just as AI technology has an "interpretability problem," where researchers can't always understand or explain what AI models are doing or why, the financial engineering behind the technology is also getting harder for most investors to map, track and grok.
- That troubles veterans of the dot-com bust and the 2008-09 financial crisis, both of which featured opaque, unconventional financing mechanisms that went haywire and caused a ton of collateral damage.
The bottom line: The more entangled AI firms get with one another, the more likely any setback to one will turn into a calamity for all.
- Right now, OpenAI — a company with enormous potential that's also raising enormous sums to place enormous bets — is propping up much of the AI industry, and the industry is propping up much of the U.S. economy.
- If it falters, or investors lose faith, everyone else will be on the hook, too.
Editor's note: This story has been updated to clarify that the AMD microprocessors OpenAI is buying are GPUs.
