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BEIJING, CHINA - JULY 30, 2021 - Advanced Micro Devices (AMD) attends ChinaJoy Entertainment Expo in Shanghai, China, July 30, 2021. November 8, 2021 - AMD announces that Meta (Facebook's parent company) will use AMD chips in its data centers. AMD's market value hit an all-time high of more than $180 billion that day, with shares up 13% at their peak. (Photo credit should read Xing Yun / Costfoto/Future Publishing via Getty Images)

AMD and OpenAI Stock Deal Explained: How AMD’s Shares Will Fund Billions in AI Chip Purchases

AMD and OpenAI stock deal has caught Wall Street’s attention after the two tech giants revealed a partnership that redefines how AI hardware deals are financed.

Following the announcement of their expanded collaboration, analysts were quick to highlight the unusual financial structure: OpenAI will pay for AMD’s AI chips using AMD’s own stock.

Under the agreement, OpenAI will help AMD refine its line of Instinct GPUs — designed to compete directly with Nvidia’s chips — and will purchase up to 6 gigawatts of compute capacity from AMD over several years. AMD expects this to generate billions in revenue.

However, instead of a traditional cash transaction, AMD granted OpenAI up to 160 million stock warrants, which will vest in stages based on performance milestones — including stock price targets. The final milestone requires AMD’s stock to soar to $600 per share, far above its pre-announcement price of $165. Following the news, AMD’s stock jumped to $214 by Monday’s close.

UBS analyst Timothy Arcuri noted that if OpenAI holds all of AMD’s shares through the full term, the stake could be worth nearly $100 billion, assuming AMD hits a $1 trillion market cap. However, he believes OpenAI is more likely to sell portions of its stake over time to pay for the chips — effectively allowing AMD to finance its customer’s purchases.

Still, Arcuri called the move a strategic validation of AMD’s AI capabilities. “OpenAI’s endorsement demonstrates AMD’s GPUs can handle cutting-edge AI workloads, which will help accelerate adoption across other major clients,” he wrote.

The deal positions AMD to gain a 30% market share in next-generation data centers, according to UBS estimates, giving the company a stronger foothold in the AI computing race currently dominated by Nvidia.

Interestingly, Nvidia itself made a similar financial play last month with a $100 billion investment in OpenAI, but in that case, the chipmaker gained equity in the AI startup — not the other way around.

While some analysts see AMD’s approach as riskier, most agree it’s a bold strategic move to secure OpenAI as a long-term partner and validate its roadmap in the hyper-competitive AI chip market.

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