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Home » OpenAI Committed to Buying $51 Million of AI Chips From a Startup Backed by CEO Sam Altman
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OpenAI Committed to Buying $51 Million of AI Chips From a Startup Backed by CEO Sam Altman

News RoomBy News Room3 December 20233 Mins Read
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Rain at one point has claimed to investors that it has held advanced talks to sell systems to Google, Oracle, Meta, Microsoft, and Amazon. Microsoft declined to comment, and the other companies did not respond to requests for comment.

Security Fears

The funding round led by Prosperity7 announced last year brought Rain’s total funding to $33 million as of April 2022. That was enough to operate through early 2025 and valued the company at $90 million excluding the new cash raised, according to the disclosures to investors. The documents cited Altman’s personal investment and Rain’s letter of intent with OpenAI as reasons to back the company.

In a Rain press release for the fundraise last year, Altman applauded the startup for taping out a prototype in 2021 and said it “could vastly reduce the costs of creating powerful AI models and will hopefully one day help to enable true artificial general intelligence.”

Prosperity7’s investment in Rain drew the interest of the interagency Committee on Foreign Investment in the United States, which has the power to scuttle deals deemed to threaten national security.

CFIUS, as the committee is known, has long been concerned about China gaining access to advanced US semiconductors, and has grown increasingly worried about China using intermediaries in the Middle East to quietly learn more about critical technology, says Nevena Simidjiyska, a partner at the law firm Fox Rothschild who helps clients with CFIUS reviews. “The government doesn’t care about the money,” she says. “It cares about access and control and the power of the foreign party.”

Rain received a small seed investment from the venture unit of Chinese search engine Baidu apparently without problems but the larger Saudi investment attracted significant concerns. Prosperity7, a unit of Aramco Ventures, which is part of state-owned Saudi Aramco, possibly could have let the oil giant and other large companies in the Middle East to become customers but also put Rain into close contact with the Saudi government.

Megan Apper, a spokesperson for CFIUS, says the panel is “committed to taking all necessary actions within its authority to safeguard U.S. national security” but that “consistent with law and practice, CFIUS does not publicly comment on transactions that it may or may not be reviewing.”

Data disclosed by CFIUS shows it reviews hundreds of deals annually and in the few cases where it has concerns typically works out safeguards, such as barring a foreign investor from taking a board seat. It couldn’t be learned why the committee required full divestment from Rain.

Three attorneys who regularly work on sensitive deals say they could not recall any previous Saudi Arabian deals fully blocked by CFIUS. “Divestment itself has been quite rare over the past 20 years and has largely been a remedy reserved for Chinese investors,” says Luciano Racco, cochair of the international trade and national security practice at law firm Foley Hoag.

OpenAI likely needs to find partners with deep-pocketed backers if it is to gain some control over its hardware needs. Competitors Amazon and Google have spent years developing their own custom chips for AI projects and can fund them with revenue from their lucrative core businesses. Altman has refused to rule out OpenAI making its own chips, but that too would require significant funding.

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