Oh, What a Tangled Web of NVIDIA Chips We Weave

Also that CoreWeave weaves...
Musk’s xAI and Oracle End Talks on a Server Deal
xAI is buying chips to build its own data center in Memphis, Tenn.

If nothing else, this story serves as a succinct showcase for the ridiculous hoops that must be jumped through to access NVIDIA chips at scale. To summarize:

  • xAI is walking away from an Oracle deal to build a "supercomputer" (AI datacenter) powered by up to 100,000 NVIDIA GPUs. Instead, they'll build their own datacenter with NVIDIA chips supplied by Dell and Supermicro. But that's on top of the 24,000 NVIDIA chips xAI is already renting from Oracle.
  • So instead, Oracle has signed a deal with Microsoft to rent many of thought NVIDIA chips that were meant for xAI. Microsoft, in turn will give them to OpenAI.
  • This is on top of the deal Microsoft struck with CoreWeave (an NVIDIA-backed startup) to access clusters of their NVIDIA chips. And that's on top of the NVIDIA chips Microsoft has purchased on their own. And likely the ones they got access to in exchange for their non-deal deal with Inflection.

This paragraph also sums up the absurdity of the current state of things nicely:

The cluster is expected to be ready by the second quarter of 2025. Oracle will buy the chips from Nvidia and rent them to Microsoft, which will make the chips available to OpenAI, according to someone with knowledge of the deal; Microsoft is an investor in OpenAI and sells access to OpenAI models.

Just to try to wrap my own head around this: xAI can't buy enough NVIDIA chips on its own so they were going to rent them from Oracle. Instead, xAI will rent them from Dell and Supermicro. But they will also still rent the ones they're using from Oracle already. Meanwhile, Oracle will rent the ones earmarked for xAI to Microsoft. These chips will be used by OpenAI to build models which Microsoft will sell, on top of OpenAI selling them. Microsoft also rents NVIDIA chips from CoreWeave to expand capacity for OpenAI to use. They also buy their own chips from NVIDIA. And likely have access to NVIDIA chips that Inflection had access to, thanks in part to an investment from NVIDIA before Microsoft cut a deal to hire most of that team, in part at least sweetened by the access that team had to NVIDIA chips. OpenAI buys its own chips from NVIDIA too. As does xAI.

I'm starting to think NVIDIA has a good business on its hands. I'm reminded of the old saying that "the only winners are the lawyers", meaning no matter which side in a legal fight wins or loses, the lawyers always win as they get paid. The more complicated the case, the better. They get paid more.

Things are so out of hand that VCs are reportedly buying massive clusters of NVIDIA GPUs to offer them up to startups in their portfolios. Or they may be renting them from another startup. Either way, NVIDIA wins.

The above absurdity all likely comes crashing down at some point, as it always does. But if NVIDIA plays it right, as they have to date, this is a launching pad.