🤖 OpenAI’s DIY Silicon: “Supposedly” Testing NVIDIA’s Turf
Welcome, AI & Semiconductor Investors,
OpenAI’s rumored in-house AI chip project is shaking up the GPU scene, testing Nvidia’s dominance and raising big questions about the future of AI hardware.
We also explore onsemi’s surprising earnings guidance and G42’s AI powerhouse partnership with AMD in France—so let’s dive in!
What The Chip Happened?
🤖 OpenAI’s DIY Silicon: “Supposedly” Testing NVIDIA’s Turf
⚡ onsemi’s Guidance Jolt: Misses & Lower Outlook Rock the Stock ⚡
🚀 Powering AI in France: G42 & AMD Team Up!
Read time: 7 minutes
OpenAI (Private)
🤖 OpenAI’s DIY Silicon: “Supposedly” Testing NVIDIA’s Turf
What The Chip: OpenAI is pushing toward a first tape-out of its own AI chip at TSMC, hoping to reduce reliance on Nvidia’s GPUs. Still, Nvidia remains a dominant force with a massive engineering base and versatile, programmable GPU architecture.
Details:
🔍 In-House ASIC Ambitions: OpenAI’s team led by Richard Ho (ex-Google AI chip lead) is finalizing a design to send for fabrication at TSMC, a critical step that can cost tens of millions of dollars.
⚙️ Tape-Out Challenges: A new chip rarely works perfectly on the first try, so OpenAI may need multiple iterations, each costing additional time and money.
🏢 Why Nvidia Still Leads: Nvidia boasts thousands of software engineers, a vast ecosystem of partners, and GPUs that handle many different AI workloads efficiently. As CEO Jensen Huang has emphasized, “flexibility and programmability” are cornerstones for accelerating advanced AI across industries.
🤝 Strategic Leverage vs. Scale: Developing in-house chips is a negotiating tool with suppliers. Yet matching Nvidia’s reach would require hundreds more specialized engineers and billions in R&D—far beyond OpenAI’s current chip team of about 40 people.
💰 Big AI Spending: Meta plans to pour $60 billion into AI next year, Microsoft aims for $80 billion in 2025, and OpenAI itself is part of a $500 billion infrastructure program. Costly custom hardware is one reason large AI players are eager to reduce dependency on a single supplier.
📈 High-Stakes Competition: Despite potential cost savings and custom optimizations, ASICs (Application-Specific Integrated Circuits) are less flexible than GPUs. That limits their ability to handle a wide range of AI models and workloads.
🚀 First-Gen Rollout: OpenAI’s chip will likely see limited deployment, primarily for running inference (rather than training) while Nvidia GPUs continue to shoulder the bulk of computing.
Why AI/Semiconductor Investors Should Care: OpenAI’s foray into custom chips underscores the increasing effort to control costs and secure supply in a hardware-intensive field. But Nvidia’s dominance, due to its robust software stack and flexible GPU offerings, will not fade overnight. Investors should watch how successful OpenAI’s tape-out proves to be—and whether it sparks broader shifts in AI hardware development or procurement strategies.
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onsemi (NASDAQ: ON)
⚡ onsemi’s Guidance Jolt: Misses & Lower Outlook Rock the Stock
What The Chip: onsemi just announced disappointing Q4 2024 earnings, missing Wall Street estimates on both revenue and EPS, and issued weaker-than-expected guidance for Q1 2025. The shortfall and conservative outlook spooked investors, sending shares sharply lower.
Details:
🔎 Earnings Miss: onsemi posted non-GAAP earnings of $0.95 per share for Q4, coming in below the $0.97 consensus estimate. GAAP EPS came in at $0.88.
💸 Revenue Slide: Q4 revenue was $1.72 billion, missing analysts’ projections of $1.76 billion and down 15% year-over-year. Full year 2024 revenue fell to $7.08 billion from $8.25 billion in 2023.
📉 Weak Guidance: Management expects Q1 2025 revenue of $1.35–$1.45 billion, well under consensus of around $1.69 billion. Adjusted EPS is guided at $0.45–$0.55, below the Street’s $0.89.
⏫ Margin Focus: Despite weaker sales, onsemi continues to emphasize discipline in controlling inventory. CEO Hassane El-Khoury stated, “While 2025 remains uncertain, we remain committed to our long-term strategy and will maintain our financial discipline.”
🤔 Demand Uncertainties: During the Q&A, management acknowledged that true demand is “a moving target” that hasn’t stabilized yet. They are actively working to keep shipping below demand levels to accelerate an inventory drawdown.
🔁 Share Repurchases: onsemi returned 54% of its 2024 free cash flow through share buybacks, highlighting management’s ongoing commitment to returning capital to shareholders.
⚙️ Segment Performance: Power Solutions (PSG), Advanced Solutions (AMG), and Intelligent Sensing (ISG) each experienced year-over-year revenue declines, ranging from 14% to 18%, reflecting broad-based market softening.
Why AI/Semiconductor Investors Should Care: With onsemi’s lower guidance, it’s clear that market volatility and inventory adjustments are weighing on chipmakers. Although near-term softness persists, onsemi’s focus on intelligent power and sensing solutions aligns with high-growth segments like automotive electrification and industrial automation. Investors should watch for signs of stabilization in demand and how effectively the company manages costs in this challenging environment.
G42 (Private) & AMD (NASDAQ:AMD)
🚀 Powering AI in France: G42 & AMD Team Up!
What The Chip: G42 has announced a strategic move into France with a major investment in AI infrastructure, partnering closely with AMD to deploy advanced GPU technology. This collaboration aims to establish one of France’s most powerful AI compute facilities in Grenoble by mid-2025.
Details:
🚀 Advanced AI Infrastructure: G42’s company Core42 will deploy the latest AMD Instinct accelerator technology in Grenoble, creating a powerhouse data center for AI-focused enterprises and researchers.
🌍 European Sovereignty Boost: This initiative marks a significant effort to enhance AI capabilities in Europe, aligning with France’s push for technological sovereignty.
⚙️ Rapid Deployment Goals: DataOne, the European data center partner, aims to complete this large-scale AI supercomputer deployment within 20 weeks.
💬 Executive Insights: “By deploying AMD GPUs, we are not only strengthening Europe’s AI infrastructure but also enabling enterprises and researchers to accelerate innovation at scale,” says Kiril Evtimov, Group CTO at G42 and CEO of Core42.
📈 AMD’s Support for Startups: Lisa Su, AMD’s Chair and CEO, highlighted AMD’s broader commitment to AI startups through AMD Ventures.
🤝 Strategic Partnerships: G42 plans to expand global AI capabilities by forging partnerships in key regions, reflecting a commitment to fueling digital transformation worldwide.
⚡ High-Density Compute: DataOne’s facilities can handle racks up to 500kW, showcasing its readiness for intense AI workloads.
Why AI/Semiconductor Investors Should Care: This move underscores the expanding global appetite for AI compute, providing AMD with a new avenue for its advanced chips while boosting France’s strategic position in AI. For investors, it signals rising demand for high-performance hardware and cloud infrastructure—key drivers of long-term growth in the semiconductor and AI sectors.
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Disclaimer: This article is intended for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions.
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[Paid Subscribers] Amazon Posts Strong Q4 2024 Results: A Closer Look at Growth, Tech, and Strategy
Executive Summary
Amazon.com, Inc. (NASDAQ: AMZN) ended 2024 on a high note, reporting fourth-quarter net sales of USD 187.8 billion, a 10% year-over-year (YoY) increase (or 11% if we exclude foreign exchange headwinds). Operating income reached USD 21.2 billion, marking a 61% YoY jump compared to the same period in 2023. Trailing Twelve Months (TTM) free cash flow—an industry term that refers to the total cash a company generates from operations over the last 12 months—came in at USD 36.2 billion, up by USD 700 million YoY.
The company’s three business segments—North America, International, and Amazon Web Services (AWS)—all contributed positively to the bottom line. North America recorded USD 115.6 billion in quarterly sales and USD 9.3 billion in operating income, while International revenues rose to USD 43.4 billion, with operating income improving to USD 1.3 billion after a loss in the prior year’s fourth quarter. AWS extended its growth trajectory, reaching USD 28.8 billion in sales and USD 10.6 billion in operating income, in large part due to strong demand for cloud infrastructure and generative artificial intelligence (AI) solutions.
Amazon’s leaders attributed this robust performance to enhanced product selection, more efficient fulfillment centers, cost-control measures, and major strides in AI innovation. “AWS now has a USD 115 billion annualized revenue run rate, reflecting our continued momentum,” said Andy Jassy, CEO of Amazon. Management also underscored the importance of improved delivery speeds—over nine billion units were delivered the same or next day worldwide in 2024—and a concerted effort to optimize inbound logistics, particularly in the United States.
Looking ahead, guidance for the first quarter of 2025 calls for net sales of USD 151 billion to USD 155.5 billion, or 5% to 9% YoY growth. Unfavorable foreign exchange rates and the lack of an extra day from last year’s leap year are expected to weigh on year-over-year comparisons. Even so, Amazon remains focused on expanding its generative AI capabilities through custom chips and advanced services, deepening the reach of its Prime ecosystem, and improving cost efficiency via robotics and automation throughout its vast global fulfillment network.
In this article, we will examine the key takeaways from the Q4 2024 earnings results, along with major growth opportunities, advancements in Amazon’s technology and products, potential short-term headwinds, an in-depth financial review (including margin tables and charts), and a strategic outlook based on management’s commentary.
Growth Opportunities
1. Rapid AI Adoption and AWS Expansion
One of the core themes in Amazon’s earnings call was the accelerating role of generative AI across industries. AWS, already a leader in cloud computing, is actively developing and deploying new AI services such as Amazon Bedrock (a fully managed service offering an array of high-performing foundation models) and advanced generative AI chips (Trainium2). These initiatives aim to lower overall compute costs, which could unlock broader use cases across retail, finance, health care, and beyond.