According to Bloomberg, Microsoft and AMD are teaming up to create their own specialized semiconductor for AI activities. Microsoft’s new semiconductor business, led by former Intel CEO Rani Borkar and comprising nearly 1,000 employees, has reportedly spent about $2 billion on the Athena AI chip, which is already being tested and may become widely available as early as next year. AMD, for its part, is helping Microsoft create its own Athena processor in exchange for financial support from the tech giant.

This move is part of Microsoft’s plan to broaden its AI capabilities while reducing its reliance on third-party processors like those from NVIDIA, which presently leads the AI accelerator market. The need for AI-capable chips has become more acute than ever in the past six months, with the ChatGPT AI bot reportedly requiring thousands of NVIDIA GPUs to build.

However, creating an alternative to NVIDIA’s lineup will be a significant challenge for Microsoft and AMD, as the company offers not only hardware solutions but also various software that work together. NVIDIA’s chips, programming language, network equipment, and servers allow customers to quickly expand their capabilities. Nonetheless, Microsoft and AMD are old partners when it comes to hardware partnerships, with special AMD chips being inside Xbox consoles.

In conclusion, the Microsoft-AMD partnership to create a specialized AI chip is a mutually beneficial relationship. Microsoft can reduce its reliance on third-party chips, while AMD gains a foothold in the AI chip market currently dominated by NVIDIA. While creating an alternative to NVIDIA’s offerings will be a significant challenge, Microsoft and AMD’s long-standing partnership and combined expertise make it possible.