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OpenAI plans to buy $51 million worth of AI chips from Sam Altman-backed startup

OpenAI plans to buy $51 million worth of AI chips from Sam Altman-backed startup

Hayo News
Hayo News
December 4th, 2023
View OriginalTranslated by Google

According to relevant documents, OpenAI has signed a letter of intent to invest US$51 million to purchase a chip inspired by the human brain developed by the startup Rain. Sam Altman, CEO of OpenAI, has previously personally invested in Rain.

Sam Altman was quickly reinstated as OpenAI CEO a month after he was fired, and he is expected to benefit from the company's continued progress on the ChatGPT project during his absence. During Altman's tenure as CEO, OpenAI signed a letter of intent to invest $510 million in a start-up called Rain AI to purchase the AI ​​chips it developed, and Altman also had a personal investment in the company.

Rain, whose headquarters are less than a mile from OpenAI's headquarters in San Francisco, is developing something called a neuromorphic processing unit (NPU) designed to simulate the functions of the human brain. OpenAI signed a non-binding agreement in 2019, agreeing to invest $51 million when the chip came to market, according to a copy of the deal obtained by WIRED and information Rain disclosed to investors this year. Rain told investors that Altman has personally invested more than $1 million in the company. This letter of intent has not been publicly reported before.

Investment documents show Rain may deliver its first hardware to customers as early as October next year. Neither OpenAI nor Rain commented on this.

OpenAI's letter of intent with Rain reveals the intertwining of Altman's personal investment network and his responsibilities as CEO of OpenAI. His previous leadership role at startup incubator Y Combinator made him one of Silicon Valley's most important dealmakers, investing in numerous startups and acting as an intermediary between entrepreneurs and large global companies. But the interference and interweaving of his multiple professional roles played a role in his recent dismissal from the OpenAI board for lack of candid communication, according to people not authorized to speak on the matter.

The Rain deal reaffirms OpenAI's willingness to invest heavily to secure chips that power its leading AI projects. Altman has publicly complained about the "extreme shortage" and "astonishingly high prices" facing AI chips. Although OpenAI relies on the powerful cloud services of Microsoft, its main investor, they have to turn off parts of ChatGPT from time to time due to hardware limitations. Altman said in a private meeting with developers that the pace of AI development may depend on new chip designs and supply chains.

Rain showed off its progress to potential investors earlier this year and expects to complete a major milestone this month: "filming" test chips, meaning the design is ready to enter production. But the startup has also undergone significant changes in leadership and investors recently. A U.S. government interagency agency that monitors national security venture capital reportedly forced Prosperity7 Ventures, a fund tied to Saudi Arabia, to sell its stake in Rain. The fund previously led Rain's $25 million funding round in early 2022.

Bloomberg first reported last Thursday that documents seen by WIRED show that this forced divestment may increase the challenges for Rain to launch its innovative chip technology, which may delay OpenAI's time to honor its $51 million in advance orders. Silicon Valley-based Grep VC took over the stake, but it and the Saudi fund declined to comment.

The United States has raised concerns about Prosperity7's deal with Rain, which also raises questions about Altman's other attempts to boost the global supply of AI chips. According to two people familiar with the matter who requested anonymity, Altman has been communicating with Middle Eastern investors in recent months with the aim of raising funds to establish a new chip company. This move will help OpenAI and other institutions reduce their investment in Nvidia GPU, Google, Amazon and a few others. Dependence on vendor-specific chips.

Smart chip frontier

Since its establishment in 2017, Rain has claimed that its brain-inspired Neural Processing Unit (NPU) will potentially provide up to 100 times more computing power than traditional graphics processing units (GPU), and is even more energy efficient in training AI. Out 10,000 times. GPU is a core component widely used by AI developers such as OpenAI, and is usually provided by Nvidia.

Altman led a seed funding round for Rain in 2018. The following year, OpenAI decided to spend $51 million to purchase Rain's chips. Currently, Rain has about 40 employees, covering experts in AI algorithm development and traditional chip design.

Recently, Rain quietly replaced its CEO. Former CEO Gordon Wilson now serves as the company's executive advisor, while William Passo, who previously served as chief operating officer, has been promoted to CEO.

Wilson confirmed his departure in a LinkedIn post but did not provide a reason. He said: "Rain is building a product that will redefine the AI ​​chip market and disrupt the existing market. I will continue to support Rain in various ways." More than 400 LinkedIn users, including some Rain employees, responded to Wilson's post Comments were made or expressions of love and support were made, but Passo was not involved. Wilson declined to comment.

According to WIRED, Rain is looking for an industry veteran to replace Wilson on a long-term basis.

Rain’s first batch of chips uses the RISC-V open source architecture supported by technology giants such as Google and Qualcomm. This architecture is mainly used in edge devices such as mobile phones, drones, cars and robots. Rain strives to create a chip that can simultaneously train and deploy machine algorithms. Most current chip designs for edge devices, such as those in smartphones, focus only on the inference phase of the algorithm. As for how OpenAI will use Rain's chips, it is not yet clear.

Rain has told investors that it has had in-depth discussions with Google, Oracle, Meta, Microsoft and Amazon about system sales. Microsoft declined to comment, while other companies did not respond to requests for comment.

security concerns

A round of financing led by Prosperity7 last year brought Rain's total funding to $33 million, which data as of April 2022 shows is enough to support the company's operations until early 2025 and bring the company's valuation to $90 million. Does not include new funds. In investor disclosure documents, Altman's personal investment and letters of intent from Rain and OpenAI were cited as important reasons to support the company.

In a press release for the funding round last year, Altman praised Rain for successfully producing a prototype in 2021, saying it would "dramatically reduce the cost of building powerful AI models and hopefully enable true general artificial intelligence in the future."

Prosperity7's investment in Rain attracted the attention of the interagency Committee on Foreign Investment in the United States (CFIUS). CFIUS has the authority to cancel transactions that may threaten national security.

CFIUS has long expressed concerns about China's access to advanced U.S. semiconductor technology and has grown increasingly concerned about China's secret knowledge of key technologies through middlemen in the Middle East, said Nevena Simidjiyska, a partner at the law firm Fox Rothschild. She helps clients with CFIUS reviews and says, "The government is not focused on the funding itself, but on access and control and the influence of foreign parties."

While Rain had previously secured a small seed investment from the venture capital arm of Chinese search giant Baidu without difficulty, a larger investment from Saudi Arabia raised serious concerns. Prosperity7 is part of state-owned Saudi Aramco's Aramco Ventures, a move that could bring Aramco and other large players in the Middle East as customers while also establishing Rain's close ties with the Saudi government.

CFIUS spokesperson Megan Apper said the committee is "committed to taking all necessary steps within its authority to protect U.S. national security," but noted that "by law and practice, CFIUS does not make public comments about transactions it may be reviewing." Comment."

The latest figures from the Committee on Foreign Investment in the United States (CFIUS) reveal that they review hundreds of investment cases every year. In the few cases that raise concerns, they often take precautions, such as preventing foreign investors from joining their boards. It remains a mystery why the company is demanding a complete divestment from Rain.

Three senior lawyers who work on sensitive transactions said they could not recall any Saudi Arabian transactions being completely halted by CFIUS. “Requests for divestment have been quite rare over the past 20 years and were usually special measures against Chinese investors,” said Luciano Racco, co-head of the international trade and national security practice at law firm Foley Hoag.

For OpenAI, if it wants to have control over its hardware needs, it needs to find a partner with strong funds. Rivals Amazon and Google have spent years developing their own specialized chips for AI projects and can use the lucrative earnings from their core businesses to fund them. Although Altman did not rule out the possibility of OpenAI manufacturing its own chips, this would undoubtedly require a large amount of capital investment.