openai challenges nvidia with broadcom ai chip partnership
san francisco, Friday, 5 September 2025.
openai is set to reduce its reliance on nvidia by partnering with broadcom to produce its own ai chips, called “xpu”, in a deal worth $10 billion. broadcom’s ceo has confirmed a large order from openai, which boosted broadcom’s stock by 5%. this move by openai mirrors similar strategies employed by tech giants like google, amazon, and meta, all seeking custom silicon solutions for ai workloads. this could challenge nvidia’s dominance in the ai chip market.
nvidia’s market position
Nvidia currently holds a dominant position in the AI hardware market, but this move by OpenAI signals a potential shift in the landscape [1]. HSBC analysts anticipate that Broadcom’s custom chip business will grow at a faster rate than Nvidia’s GPU business by 2026 [1]. OpenAI, one of Nvidia’s earliest and most demanding clients, is seeking to address its increasing computational needs by developing its own chips [1]. Sam Altman, OpenAI’s CEO, has openly discussed the company’s growing demand for computing power to support its AI models like GPT-5 [1].
revenue implications for nvidia
The partnership between OpenAI and Broadcom could affect Nvidia’s future revenue streams [1]. While OpenAI intends to use the custom-designed ‘XPU’ chips internally, this lessens their reliance on Nvidia’s GPUs [1][4]. Other major tech companies like Google and Amazon have already adopted similar strategies, designing their own chips for AI workloads [1]. This trend of in-house chip development among key clients could lead to a deceleration in Nvidia’s growth compared to the initial surge seen during the AI investment boom [1].
competitive advantage and stock impact
Nvidia’s competitive advantage in the AI chip market is being challenged as more companies explore custom solutions [1]. Broadcom’s CEO, Hock Tan, has indicated significant growth in AI revenue for fiscal year 2026, driven by orders exceeding $10 billion from a new client, now confirmed to be OpenAI [2][4]. This development has already positively impacted Broadcom’s stock, which saw a 4.5% increase in after-hours trading [1]. The long-term effects on Nvidia’s stock (NVDA:NASDAQ) will depend on its ability to innovate and maintain its market share against increasing competition [5].