Broadcom will not fund OpenAI's Jalapeno chip unless Microsoft agrees to buy about 40%

Broadcom has informed OpenAI it will not finance production of OpenAI’s first custom AI chip unless Microsoft commits to buying roughly 40% of the initial supply, and Microsoft has not agreed to such a purchase. OpenAI sees that dependency as a serious financing risk: an internal message from OpenAI manager Sachin Katti called the Microsoft requirement “financially unattractive” and a potential long-term drag on the program. That demand leaves OpenAI’s in-house silicon push facing an immediate funding obstacle.

The initial phase is estimated to cost about $18 billion and centers on a chip codenamed Jalapeno, designed to run OpenAI’s models more efficiently than incumbent NVIDIA hardware. Jalapeno is not expected to appear until 2027, and reporting says Broadcom’s purchase — condition would apply only to this first chip rather than the broader program.

OpenAI’s wider hardware effort, known as Nexus, aims for roughly 10 gigawatts of data-center capacity and could require up to $180 billion in chip production over time, raising the stakes for financing and supplier choice. The negotiation underscores tensions with dominant hardware providers and follows earlier deal complications tied to OpenAI’s private status, when a planned share — backed loan from SoftBank was reportedly reduced from $10 billion to $6 billion because lenders struggled to value the company.

If Microsoft declines to underwrite the initial buy, Broadcom may not proceed with production, a result that could delay Jalapeno, raise OpenAI’s costs and force revisions to its hardware strategy and partner lineup. The episode highlights how partner creditworthiness and large guaranteed orders can determine whether custom AI infrastructure projects move from design into large — scale production.