On Monday, chipmaker Advanced Micro Devices (AMD 7.44%) announced a huge artificial intelligence (AI) strategic partnership with OpenAI, the AI model developer best known for its ChatGPT chatbot. Not only did this news send shares of AMD up a whopping 23.7%, but it also gave a boost to many other AI stocks and the market in general.
AMD's news came exactly two weeks after its rival Nvidia (NVDA 4.14%), whose graphics processing units (GPUs) dominate the AI chip market, announced a massive deal with OpenAI.
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Advanced Micro Devices-OpenAI strategic partnership
The AMD-OpenAI strategic partnership involves AMD supplying 6 gigawatts of its Instinct series GPUs to power OpenAI's next-generation AI infrastructure. The first 1 gigawatt deployment of AMD Instinct MI450 GPUs is set to begin in the second half of 2026. That's the same time frame involved in the Nvidia-OpenAI deal.
Moreover -- and this is big for AMD -- "AMD has issued OpenAI a warrant for up to 160 million shares of AMD common stock, structured to vest as specific milestones are achieved," according to the press release. AMD has a total of about 1.62 billion shares outstanding, so 160 million shares is about 10% of total shares.
For context, before the deal was announced, AMD had a market cap of about $267 billion. Ten percent of that is $26.7 billion.
NASDAQ: AMD
Key Data Points
Putting 6 gigawatts in context
Six gigawatts equates to a ton of computing power. Here are a couple of stats to put 6 gigawatts of power in context:
- New York City's average power demand is about 6.5 gigawatts, and its peak power demand in the summer is roughly 10 to 11 gigawatts.
- Six large-scale nuclear reactors have a power output of about 6 gigawatts.
Recap of the Nvidia-OpenAI AI deal
On Sept. 27, Nvidia announced its massive deal with OpenAI. The highlights of this strategic partnership:
- The companies plan to deploy at least 10 gigawatts of Nvidia systems for OpenAI's next-generation AI infrastructure.
- The announcement stated that the systems will be used to "train and run [OpenAI's] next generation of models on the path to deploying superintelligence." [Emphasis mine.]
- The first phase is targeted to come online in the second half of 2026 using the Nvidia Vera Rubin platform.
- Nvidia plans to invest up to $100 billion in OpenAI as the new Nvidia systems are deployed.
What are the broader implications for the AI space?
This seems like a win-win deal for both AMD and OpenAI. OpenAI secures a large supply of AI-enabling GPUs over multiple years. This is no small thing, as GPUs are in great demand, so supply has been tight. That's especially true of Nvidia's GPUs, but no doubt, also true to some extent for AMD.
On AMD's part, it secures a huge multiyear customer for its GPUs, and it is poised to get a hefty inflow of cash as OpenAI buys up to 10% of AMD's shares. The partnership "is expected to deliver tens of billions of dollars in revenue for AMD," CFO Jean Hu said in the release. Moreover, it's "expected to be highly accretive to AMD's non-GAAP [generally accepted accounting principles] earnings per share, " she added.
Taken together with the recent Nvidia-OpenAI humongous AI deal and other big deals in the space, there are positive implications for the broader AI market.
The main implication, in my opinion, is that these massive AI chip and infrastructure deals should accelerate the race to move beyond generative AI to achieve artificial general intelligence (AGI) and then artificial superintelligence (ASI), as I wrote about after the Nvidia-OpenAI deal was announced. Nvidia and AMD should be two of the big beneficiaries of this race, as companies rush to buy even more of their AI-enabling GPUs.
