OpenAI's new Jalapeno chip, designed using AI, has shown promising results in early tests, potentially outpacing Nvidia's top-performing Blackwell chip. This development could significantly impact the AI hardware landscape over the next five years, according to macro investor Jordi Visser.
TL;DR
- OpenAI's Jalapeno chip, designed with AI, shows superior total cost of ownership over Nvidia's Blackwell in initial tests.
- Macro investor Jordi Visser predicts Nvidia's scarcity advantage will disappear in five to six years due to competition from AI-designed chips.
- Nvidia's Q2 FY2027 revenue reached $96.22 billion, with strong demand outpacing supply, but long-term value may be at risk if custom silicon gains traction.
What happened
OpenAI has developed a new AI-designed chip called Jalapeno, which has shown superior total cost of ownership (TCO) compared to Nvidia's Blackwell chip in early tests, according to 247 Wall Street. Chip analyst Eric Bleeker cited a SemiAnalysis headline highlighting Jalapeno's potential advantages. Jim Cramer on CNBC noted that Nvidia's investment in OpenAI could backfire as OpenAI competes with its own chip.
Macro investor Jordi Visser, in an interview on The Pomp Podcast, argued that Nvidia's current scarcity advantage will disappear in five to six years due to competition from AI-designed chips like Jalapeno. He acknowledged that Jalapeno won't disrupt Nvidia's numbers immediately but will pose a significant threat in the long term.
Nvidia reported a record Q2 FY2027 revenue of $96.22 billion, up 105.8% year over year, with Data Center revenue of $89.02 billion. Nvidia's CEO Jensen Huang stated that the company has supply for approximately 70% of the demand, with fiscal 2028 revenue expected to grow around 70% year over year. Despite the strong results, Nvidia's stock dropped 4.57% on August 28, 2026, though it is up 16.79% year to date.
Why it matters
For AI/ML developers and startup founders, the emergence of AI-designed chips like Jalapeno could provide more competitive hardware options, potentially reducing reliance on Nvidia's GPUs. This could lead to lower costs and increased innovation in AI hardware.
For tech investors, the long-term implications of AI-designed chips are significant. If custom silicon gains traction, it could erode Nvidia's market dominance and lead to a reevaluation of its current valuation. Investors should watch memory pricing, hyperscaler capex mix, and the deployment timeline of OpenAI's chips.
The competitive landscape in AI hardware is heating up, with major players like OpenAI and potential successors to Jalapeno posing a threat to Nvidia's market share. The next five to six years will be crucial in determining the future of AI hardware and the companies that will lead the market.
Key facts
- OpenAI's Jalapeno chip is designed using AI and has shown superior TCO over Nvidia's Blackwell in early tests.
- Macro investor Jordi Visser predicts Nvidia's scarcity advantage will disappear in five to six years due to competition from AI-designed chips.
- Nvidia's Q2 FY2027 revenue reached $96.22 billion, up 105.8% year over year, with Data Center revenue of $89.02 billion.
- Nvidia's stock dropped 4.57% on August 28, 2026, but is up 16.79% year to date.
- Nvidia's CEO Jensen Huang stated that the company has supply for approximately 70% of the demand, with fiscal 2028 revenue expected to grow around 70% year over year.
- Eli Lilly cited a co-innovation AI lab with Nvidia for drug discovery, posting $22.97 billion in Q2 revenue and raising FY26 revenue guidance to $85.0 billion to $87.0 billion.
- Coinbase's Q2 revenue fell 18.51% to $1.22 billion, with the stock down 21% year to date despite prediction-markets revenue passing $100 million annualized.
Context
The AI hardware market is evolving rapidly, with companies like OpenAI and Nvidia at the forefront of innovation. The development of AI-designed chips like Jalapeno represents a significant step forward in the quest for more efficient and powerful AI hardware.
Nvidia has long been a dominant player in the AI hardware market, with its GPUs powering many of the world's most advanced AI systems. However, the emergence of competitive hardware options like Jalapeno could challenge Nvidia's market share and lead to a more competitive landscape.
The long-term implications of AI-designed chips are significant for the AI industry as a whole. As more companies invest in developing their own custom silicon, the market could see increased innovation, lower costs, and a broader range of hardware options for AI/ML developers and startups.
