OpenAI signs another chip deal, this time with AMD

OpenAI has signed a deal with AMD worth as much as $100 billion to the latter over several years – and could see the AI leader taking a 10% stake.

As part of a flurry of tech reveals and partnership announcements, OpenAI said it would use 6 Gigawatts of AMD GPUs via a multi-year, multi-generation deal that will start with a one-gigawatt deployment in the second half of next year of AMD's Instinct MI450 Series GPUs.

"By sharing technical expertise to optimize their product roadmaps, AMD and OpenAI are deepening their multi-generational hardware and software collaboration that began with the MI300X and continued with the MI350X series," OpenAI said in a statement announcing the deal. "This partnership creates a true win-win for both companies, enabling very large-scale AI deployments and advancing the entire ecosystem."

In order to "further align" the two companies' strategic interests, AMD has given OpenAI the ability to buy up to 160 million shares at a low fixed price, which will vest as the pair hit key milestones, including that first 1GW deployment but also share price targets. That could see OpenAI taking a 10% stake in AMD.

"This partnership is a major step in building the compute capacity needed to realize AI's full potential," said Sam Altman, co-founder and CEO of OpenAI.

The deal follows a similarly massive partnership worth $100bn with rival chipmaker Nvidia.

Big news for AMD

While OpenAI has used AMD chips before, the deal is a big one for a chipmaker that until now has "trailed" rival Nvidia in the AI boom, noted one analyst. "AMD has really trailed Nvidia for quite some time," Leah Bennett, chief investment strategist at Concurrent Asset Management, told Reuters. "So I think it helps validate their technology."

AMD's stock jumped by nearly 30%, while Nvidia's fell slightly on the news of the deal, though the rival chipmaker signed its own $100bn deal for 10GW of infrastructure last month.

AMD executives told Reuters that it expected to start seeing revenue from the deal next year as the 1GW facility is built, and that the deal will be worth tens of billions in annual revenue for the chipmaker – and by sparking deals with other customers, be worth more than $100bn over the next four years.

"Our partnership with OpenAI is expected to deliver tens of billions of dollars in revenue for AMD while accelerating OpenAI's AI infrastructure buildout," said Jean Hu, EVP, CFO and treasurer of AMD, in a statement. "This agreement creates significant strategic alignment and shareholder value for both AMD and OpenAI and is expected to be highly accretive to AMD's non-GAAP earnings-per-share."

OpenAI's $1tn in deals

The AMD deal takes OpenAI above the $1 trillion mark in deals focused on infrastructure and deployment alone, notes the Financial Times.

That includes the partnerships with chipmakers AMD and Nvidia, as well as rollout deals signed with Oracle and Coreweave, that will see OpenAI gain 20GW of compute capacity in the next decade, the report notes, adding that OpenAI itself estimates each GW of capacity costs it about $50bn – hence the $1trn bill. That includes the $500bn Stargate plans.

However, analysts noted that OpenAI doesn't have the money to pay those bills – though nor does the wider industry, with Bain & Co warning the cost of compute for the wider AI market will top $2trn by 2030, with revenue falling at least $800 short. "OpenAI is in no position to make any of these commitments," Gil Luria, analyst at DA Davidson, told the FT.

The various stock options may help it fund its investments, and echo the Nvidia deal that sees that chipmaker invest money into OpenAI to effectively enable it to buy its hardware.

That said, such structures and the high costs have raised concerns that the AI market is a bubble, with one investor saying: "there's a reasonable chance that a tremendous amount of capital destruction is going to come through this cycle."

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