The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.

OpenAI is now a chipmaker. That could cause headaches for Nvidia, another major chipmaking firm that cultivated close ties with OpenAI as a top chip supplier.

On Wednesday, the AI start-up and Broadcom jointly announced the development of a custom AI chip called Jalapeño. The companies said the chip was built from scratch for inference, which is the ability for large-language models to handle user requests or questions in products like OpenAI's ChatGPT.

Robert Kiyosaki says this 1 asset will surge 400% in a year and begs investors not to miss this 'explosion'

Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — here are 5 ways to build wealth like a landlord without actually being one

Millionaires under 43 hold only 25% of their wealth in stocks. Here's where their money is actually going

It was the latest move for OpenAI in its effort to build a homegrown stack to support its growing range of AI models, products and hardware. It could also reduce OpenAI's dependence on semiconductors from Nvidia, as more tech companies peel off to design their own chips that challenge the dominance of the most valuable publicly-traded company.

OpenAI President and co-founder Greg Brockman said the Jalapeño chip would pave the way for quicker deployment of reliable AI that's more affordable for consumers and businesses.

"By designing more of the stack ourselves, we can serve more intelligence with greater efficiency and keep pushing advanced AI toward broader access," Brockman said in a news release. (1)

Last October, OpenAI inked a deal (2) with the California-based Broadcom chipmaker to partner in developing in-house chips that could power its slate of products like ChatGPT. OpenAI said at the time it planned to use enough homegrown chips to consume ten gigawatts of electricity, enough energy to power millions of homes. To better understand the scale of energy consumption in play: Each nuclear reactor, for example, produces roughly one gigawatt of electricity, per the Department of Energy. (3)

Broadcom President and CEO Hock Tan said the partnership with OpenAI would be a critical piece in building out the physical infrastructure to sustain AI for the next decade.

"By co-developing our industry-leading silicon directly with OpenAI, we are enabling the deployment of gigawatt scale data centers with Microsoft and other partners beginning in 2026," Tan said. The announcement didn't list a release date for the Jalapeño chip.

Late last year, Nvidia said it was exploring a (4) $100 billion megadeal to invest into OpenAI and allow the ChatGPT-maker to use its semiconductor chips within its expanding fleet of data centers. The preliminary agreement was one part of tech companies' sprint to spend hundreds of billions on data centers.

It was never finalized. The Wall Street Journal reported in January (5) the deal between the pair of tech behemoths was on ice for the time being.

OpenAI CEO Sam Altman defended the strength of the companies' relationship. "We love working with NVIDIA and they make the best AI chips in the world. We hope to be a gigantic customer for a very long time," Altman wrote on X in early February. (6)

It's been a mutually beneficial arrangement for Altman and Nvidia CEO Jensen Huang so far. Altman has said (7) he needs Nvidia's chips for OpenAI to reach its revenue targets, while Huang can count on OpenAI to drive sales of its semiconductors.

Read More: Here are 5 fixed costs Americans constantly overpay for. How many are sabotaging your budget?

Investors don't appear rattled by OpenAI's in-house chip announcement. Nvidia was trading at $195 per share on Thursday, dropping just under 2% from the prior day.

Nvidia's stock, though, has fallen over the past week, part of a broader market slump (8) for tech companies as investors continue questioning whether AI will bring the large profits that correlate with enormous valuations in the tech sector. Nvidia is valued at over (9) $5 trillion, making it the most valuable publicly-traded company ever.

Nvidia also reported record sales (10) in the first quarter of the year, driven by demand for computing hardware such as graphics processing units. Nvidia's supremacy may be challenged by AI companies seeking to go in-house for silicon chips, but it isn't likely to get knocked off its high perch anytime soon.

Dave Ramsey warns this is America's most common retirement mistake — here's what it is and how to fix it ASAP

Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how

This little-known industry practice is inflating American drivers' insurance bills. Here are 3 easy ways to fight back

Here's the average income of Americans by age in 2026. Are you keeping up or falling behind?

Join 250,000+ readers and get Moneywise's best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

OpenAI (1), (2); U.S. Department of Energy (3); Nvidia News (4), (10); The Wall Street Journal (5); X (6); CNBC (7); CBS News (8), (9)

This article originally appeared on Moneywise.com under the title: Nvidia once explored a $100B chip deal with OpenAI. Now OpenAI is building its own chips from scratch

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.