AMD Soars After Striking Major Deal with OpenAI

• AMD has finalized a multi-year deal with OpenAI to supply AI chips worth tens of billions in annual revenue, including hundreds of thousands of GPUs equivalent to six gigawatts starting in 2026, with ripple effects projected to generate over $100 billion in new revenue over four years.
• The agreement grants OpenAI a warrant to purchase up to 160 million AMD shares at 1 cent each, vesting on milestones like MI450 shipments and stock price targets up to $600, allowing a potential 10% stake in the $267 billion-valued chipmaker.
• This partnership, building on prior collaborations, diversifies OpenAI’s GPU sources amid commitments to Nvidia and in-house development, driving AMD shares up over 25% while pressuring Nvidia and Broadcom stocks downward.

Advanced Micro Devices (AMD) has secured a landmark multi-year agreement with OpenAI, positioning itself as a key supplier of artificial intelligence chips and potentially reshaping the competitive landscape dominated by Nvidia (NVDA). Under the terms, AMD will deliver hundreds of thousands of its graphics processing units (GPUs), equivalent to six gigawatts of capacity, starting in the second half of 2026. This deployment includes OpenAI constructing a one-gigawatt facility powered by AMD’s forthcoming MI450 series chips, with revenue recognition commencing next year. Executives at AMD project this partnership alone will generate tens of billions of dollars in annual revenue, while the broader ripple effects could unlock more than $100 billion in new revenue over four years from OpenAI and additional customers.

The arrangement extends beyond hardware supply, granting OpenAI the option to acquire up to roughly 10% of AMD through a warrant for 160 million shares at 1 cent each, vesting in tranches tied to milestones. The initial vesting occurs after the first MI450 shipments in the second half of 2026, with subsequent portions linked to escalating AMD stock price targets culminating at $600 per share. With AMD’s 1.62 billion shares outstanding and a current valuation of $267.23 billion – reflected in Friday’s close of $164.67 – the deal underscores the chipmaker’s growing appeal in the AI sector. OpenAI, valued at $500 billion, gains a strategic stake in a direct challenger to NVDA, amplifying its influence over the ecosystem. As AMD strategy chief Mat Hein told Reuters, this endorsement from a pioneer like OpenAI is poised to attract further adoption, given the company’s sway over industry standards.

This collaboration builds on years of joint development, where OpenAI contributed to the design of AMD’s earlier MI300X chips, highlighting a deepening technical alignment. For OpenAI, the deal addresses surging compute demands critical to sustaining innovations like ChatGPT, as articulated by CEO Sam Altman. It complements, rather than supplants, existing commitments: a September non-binding pact with NVDA for up to $100 billion in investments, encompassing at least 10 gigawatts of systems and a gigawatt deployment of next-generation Vera Rubin chips in late 2026. OpenAI’s diversification extends to in-house silicon efforts, including a partnership with Broadcom (AVGO), mirroring strategies employed by cloud leaders like Alphabet’s Google and Amazon, who develop custom processors to reduce reliance on third-party vendors.

Market reactions were swift, with AMD shares surging more than 25% to $206.16 in premarket trading, on pace for their highest open since March 2024. In contrast, NVDA dipped 2%, and AVGO fell 3%, signaling investor recalibration amid intensifying rivalry. Analysts project AMD’s full-year revenue at $32.78 billion, a figure this deal could significantly elevate through expanded AI deployments. AMD executive vice president Forrest Norrod described the pact as transformative, not only for the company but for redefining industry dynamics, where diversified supply chains mitigate bottlenecks in GPU availability – a persistent challenge as AI models scale exponentially.

OpenAI’s broader maneuvers, including a recent non-binding agreement with Microsoft to transition into a for-profit entity, reflect evolving governance to fuel accelerated growth. Yet, sources confirm the AMD deal integrates seamlessly with these plans, preserving commitments to Microsoft and ongoing compute initiatives. In the broader AI hardware arena, where NVDA commands over 80% market share, AMD’s MI450 platform – optimized for high-performance inference and training – offers competitive efficiency gains, potentially eroding that dominance as hyperscalers and startups seek alternatives. This partnership exemplifies how strategic alliances are fortifying the AI infrastructure backbone, ensuring robust capacity for the next wave of generative technologies while fostering innovation through shared equity incentives.

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