AMD Strikes Multi-Year AI Chip Deal with OpenAI Worth Billions

In a major development for the global AI industry, Advanced Micro Devices (AMD) has announced a multi-year deal to supply artificial intelligence chips to OpenAI, the creator of ChatGPT. The partnership, expected to bring in tens of billions of dollars in annual revenue, gives OpenAI the option to acquire up to 10% of AMD’s stake. The agreement marks a significant endorsement of AMD’s growing capabilities in AI chip design and positions it as a strong competitor to Nvidia, the current market leader.

Following the announcement, AMD’s shares surged more than 23% in premarket trading, reflecting investor confidence in the transformative potential of the deal. Forrest Norrod, Executive Vice President at AMD, described the agreement as “transformative not just for AMD, but for the dynamics of the industry.”

Under the deal, AMD will deploy hundreds of thousands of its advanced AI chips, equivalent to six gigawatts of computing power, over several years starting in the second half of 2026. OpenAI will also establish a one-gigawatt data center powered by AMD’s upcoming MI450 series chips, beginning next year. AMD expects to start recognizing revenue from the project once chip shipments commence and anticipates over $100 billion in new revenue over the next four years from OpenAI and other clients inspired by this collaboration.

Mat Hein, AMD’s Chief Strategy Officer, said the partnership would set a benchmark in the AI ecosystem, encouraging other industry players to join the AMD platform. OpenAI CEO Sam Altman added that the deal would help the company scale its AI infrastructure to meet growing global demand.

As part of the agreement, AMD has issued a warrant allowing OpenAI to purchase up to 160 million AMD shares at a nominal price of one cent each, tied to performance milestones and AMD stock price targets that could go as high as $600 per share. Currently, AMD is valued at $267 billion with 1.62 billion shares outstanding, while OpenAI holds a valuation of about $500 billion.

The partnership deepens an existing relationship between AMD and OpenAI, which have collaborated on previous generations of chips like the MI300X. Despite this deal, OpenAI continues to diversify its chip supply strategy, working with Nvidia, Microsoft, and Broadcom to develop custom AI hardware and secure the computational power required for its next generation of AI models.

Source: Business Standard