AMD strikes AI chip supply deal with OpenAI

American multinational corporation and technology company, Advanced Micro Devices (AMD), has signed a multi-year agreement to supply artificial intelligence chips to OpenAI, a move that could generate tens of billions of dollars in annual revenue for the company. 

The deal also gives the ChatGPT creator the option to acquire up to about 10% of AMD’s shares.

The partnership strengthens OpenAI’s position while offering a major boost to AMD, one of Nvidia’s biggest competitors in the AI chip market. 

“We view this deal as certainly transformative, not just for AMD, but for the dynamics of the industry,” said AMD executive vice president Forrest Norrod.

Following the announcement, AMD’s shares rose more than 23% in premarket trading, setting them up for their highest opening since March 2024. 

The agreement includes the supply of hundreds of thousands of AMD’s GPUs, equivalent to six gigawatts, with deployment starting in the second half of 2026.

OpenAI plans to build a one-gigawatt data facility powered by AMD’s upcoming MI450 chips next year, with AMD beginning to record revenue once production starts. 

Company executives project the deal could bring over $100 billion in new revenue over four years from OpenAI and other clients influenced by the agreement. 

“Other people are going to come along with it because this is really the pioneer, a pioneer in the industry that has a lot of influence over the broader ecosystem,” said AMD strategy chief Mat Hein.

OpenAI CEO Sam Altman said the deal will help build the AI infrastructure needed for the company’s growth. Analysts expect AMD to post about $32.78 billion in revenue this year, according to LSEG data.

As part of the arrangement, AMD issued a warrant that allows OpenAI to buy up to 160 million shares for 1 cent each, with milestones tied to chip deliveries and AMD stock performance. The first milestone will be achieved after the initial MI450 shipment in 2026, with others tied to price targets that rise to $600 per share.

AMD currently has 1.62 billion shares outstanding and a market value of $267.23 billion, with shares closing at $164.67 on Friday, according to LSEG data.

(YahooFinance)

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