AI Daily: Microsoft announces new cooling system for AI chips

Catch up on the top artificial intelligence news and commentary by Wall Street analysts on publicly traded companies in the space with this daily recap compiled by The Fly:

NEW COOLING SYSTEM: Microsoft (MSFT) said on its website, “The chips that datacenters use to run the latest AI breakthroughs generate much more heat than previous generations of silicon. Anybody whose phone or laptop has overheated knows that electronics don’t like to get hot. In the face of rising demand for AI and newer chip designs, the current cooling technology will put a ceiling on progress in just a few years. To help address this problem, Microsoft has successfully tested a new cooling system that removed heat up to three times better than cold plates, an advanced cooling technology commonly used today. It uses microfluidics, an approach that brings liquid coolant directly inside the silicon – where the heat is. Tiny channels are etched directly on the back of the silicon chip, creating grooves that allow cooling liquid to flow directly onto the chip and more efficiently remove heat. The team also used AI to identify the unique heat signatures on a chip and direct the coolant with more precision.”

OPENAI DEAL: After OpenAI and Nvidia (NVDA) announced a strategic partnership to deploy at least 10GW of AI data centers with Nvidia systems, Barclays analyst Tom O’Malley said the announcement shows “we are in a compute bonanza.” While Broadcom’s (AVGO) $10B deal announcement with OpenAI for custom silicon came first a few weeks ago, general purpose silicon will run the majority of OpenAI workloads at least through the end of this decade and general-purpose silicon is “most certainly not dead,” the analyst added. Based on commentary from the company’s Q2 earnings, the analyst estimates 1GW is the equivalent of about $35B-plus in revenue to Nvidia, so the firm doesn’t think Nvidia is “getting enough credit” as this deal is entirely incremental and could add $35B to Street numbers. Barclays keeps an Overweight rating and $200 price target on Nvidia shares.

Nvidia’s plan to invest $100B in OpenAI has helped reset market expectations about the startup’s finances, a familiar play for Nvidia, Robbie Whelan and Bradley Olson of The Wall Street Journal reports. CEO Jensen Huang has repeatedly used the confidence investors have in Nvidia’s future to strengthen the company’s supply chain partners. The deal highlights an issue some investors call “circularity” in Nvidia’s prospects, where the company boosts demand for its AI chips by supporting startups and other companies.

After Nvidia announced the decision to invest up to $100B in OpenAI to promote deployments of data centers and power capacity, which includes a letter of intent for Nvidia to be involved in at least 10 GW of systems, BofA said “the optics of such large investment in a customer will raise questions” until Nvidia clarifies the appropriate accounting treatment. However, the firm sees it as equity investment with OpenAI treated as any other customer and estimates the deal could lead to about $300B-$500B in revenue over time, or roughly a 3-times to 5-times return on investment. While no share is specified, the agreement on the surface raises the competitive risks for other vendors including Broadcom (AVGO) and AMD (AMD), adds BofA, which keeps a Buy rating and $235 price target on Nvidia shares.

DATA CENTER EXPANSION: OpenAI and Oracle (ORCL) are expected to announce an expansion of their data center in Abilene, Texas, Anissa Gardizy of The Information reports, citing someone familiar with the plans. OpenAI is expected to spend hundreds of billions of dollars renting servers from Oracle Cloud’s Texas facilities over the next decade, the website adds.

DEMAND TOO STRONG: Wells Fargo analyst Michael Turrin upgraded CoreWeave (CRWV) to Overweight from Equal Weight with a price target of $170, up from $105. The company is positioned to benefit from the elevated build cycle and hyperscaler industry shortages into 2026, the analyst tells investors in a research note. Wells believes supply constraints continue, with hyperscaler shortages continuing through early 2026, creating potential for CoreWeave to win market share. In addition, Nvidia’s recent backstop to buy all unused capacity through 2032 gives CoreWeave a “blank check” to build out new capacity for six years, contends the firm. Wells says CoreWeave’s demand signals are growing and “too strong to ignore.”

LLAMA AVAILABILITY: Meta (META) said in a statement, “The U.S. and its closest allies should have the best tools at their disposal to defend themselves and keep their citizens safe. Access to Llama helps them develop advanced AI tools to enhance decision-making, operational efficiency, and mission-specific capabilities. We are expanding access to more key democratic U.S. allies in Europe and Asia, as well as NATO and European Union institutions.” The company added, “In a world where geopolitical power and national security are deeply intertwined with economic output, innovation, and growth, the widespread adoption of open-source models like Llama will be essential to maintaining U.S. and allied AI leadership and ensuring our shared values underpin the systems and standards adopted elsewhere. This is recognized by the US government in its AI Action Plan for America, which Meta endorses.”

SMART GLASSES: Citi is more positive on Meta Platforms’ artificial intelligence glasses following Meta Connect. The firm believes adoption of the glasses could reach a “tipping point” in 2026. Meta has a multi-year head start on AI glasses while the device’s capabilities are increasing, the firm tells investors in a research note. Meta remains a top pick at Citi with a Buy rating and $915 price target.