Software giant Microsoft Corp. is working with the chipmaker Advanced Micro Devices Inc. (AMD) to jointly develop a new artificial intelligence (AI) processor, according to a report from Bloomberg citing unidentified “people with knowledge of the matter”.

The report states that both companies are teaming up to develop an alternative to Nvidia Corp’s graphics processing units (GPUs), which currently dominate the market for AI processor chips.

In order to help AMD enter the AI chip market, Microsoft is offering resources and financial assistance to the chipmaker while AMD is reportedly assisting the Redmond giant in the making of a homegrown AI processor, codenamed “Athena”, claim Bloomberg’s sources. However, a Microsoft spokesperson denied AMD’s involvement in this particular project.

For those unaware, Microsoft has been secretly working on the Athena processor – a first-party chip built to power the supercomputers that train AI – since as early as 2019. This chip will use TSMC 5nm process and steadily create more generations of the chip in the future. The company has already invested around $2 billion into the development of Athena AI processor.

Currently, the Athena project has 300 employees dedicated to it and is being tested by a small group of Microsoft and OpenAI employees. The chip is expected to be ready for mass production in 2024.

At present, Microsoft is using chips made by NVIDIA for its AI services. If the company is able to successfully create its own in-house processor that can train and power AI, it will not only reduce its dependence on NVIDIA for its AI chip supply but also could result in significant savings for the company that can be used to improve the AI its services rely on.

In an earnings call on Tuesday, AMD CEO Lisa Su said that AI is also a key priority for the chipmaker.

“We are very excited about our opportunity in artificial intelligence, which is also our highest strategic priority. We are in the very early days of the era of artificial intelligence computing. At this stage, the adoption rate and growth rate of artificial intelligence is faster than that of any other technology in recent history,” Sue added.

The fast-growing popularity of AI services like Microsoft-backed OpenAI ChatGPT is increasing interest in AI in the technology sector. The new agreement between AMD and Microsoft is not only expected to help both companies expand their reach in the booming AI-capable GPU market but it will also help keep the market competitive and diverse.

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