Advanced Micro Devices (AMD -7.78%) supplies chips for some of the world's most popular consumer electronics, from Sony's PlayStation 5 to Tesla's EV infotainment systems. But investors are currently focused on its data center business, where it sells a lineup of graphics processing units (GPUs) specifically designed to power artificial intelligence (AI) development.
Nvidia has dominated the AI GPU market for the last few years, but AMD's chips are quickly catching up in terms of processing power, and some of the biggest data center operators are lining up to buy them.
In fact, on Oct. 6, AMD announced a deal with OpenAI to potentially supply the ChatGPT creator with millions of its most advanced GPUs from now through 2030. It's the biggest contract AMD has signed yet for its AI data center chips, based on publicly available information. So should investors pile into its stock right now?
Powerful new chips coming in 2026
AMD released its MI300X data center GPU in December 2023, more than a year after Nvidia launched its then-industry-leading H100, and tech giants like Oracle, Microsoft, and Meta Platforms were among its early adopters.
Nvidia continues to lead the data center market with new architectures like Blackwell and Blackwell Ultra, but AMD is no longer more than a year behind. The company is now shipping its MI350 series GPUs, which were built on its new Compute DNA (CDNA) 4 architecture. Those new chips' performance on inference workloads is a whopping 35 times faster than its prior-generation chips.
According to AMD, the MI355X delivers comparable performance to Nvidia's Blackwell GB200 GPU, but it can process up to 40% more tokens (words, symbols, and punctuation) in AI inference workloads for the same cost. Therefore, these chips are significantly cheaper to run, which is why data center giant Oracle is building a GPU cluster with more than 130,000 of them.
But all eyes are on AMD's MI400 lineup, which is scheduled for release in 2026. These chips will be paired with specialized software and hardware systems to create Helios, a fully integrated AI data center rack. According to CEO Lisa Su, this will make MI400 GPUs a staggering 10 times more powerful than the MI350s. Depending on what Nvidia rolls out next year, this could be the first time AMD's hardware takes the lead on performance.
OpenAI will start using MI450 GPUs in the second half of 2026, and it will continue buying future generations of AMD chips until it has deployed 6 gigawatts worth of capacity.
The OpenAI deal could supercharge AMD's data center business
AMD generated a record $7.7 billion in total revenue during the second quarter of 2025. Its data center business -- led by AI GPU sales -- was the largest of its four segments, contributing $3.2 billion.
For some perspective, AMD's data center business generated just $1.3 billion in revenue in Q2 2023, when the AI boom was beginning to ramp up. But its 146% growth since then might pale in comparison to what's in the pipeline with the OpenAI deal.
According to semiconductor industry analyst Dr. Ian Cutress of the More Than Moore substack, 6 gigawatts of computing capacity could equate to between 3 million and 6 million MI450 GPUs. He estimates the value of the deal could be around $90 billion, so it could be rocket fuel for AMD's data center business.
There's a huge catch
As part of the deal, OpenAI will have the right to purchase up to 160 million AMD shares at a price of just $0.01 per share, as long as certain milestones are met by 2030:
- The shares will vest in tranches until OpenAI purchases the full 6 gigawatts of computing capacity.
- AMD shares have to meet certain price milestones, ending at $600 per share, which ensures existing shareholders benefit from some upside before they get diluted by the sale of such a large stake in the company.
But if OpenAI receives 160 million AMD shares and sells them at $600 each, it would make a whopping $96 billion. Therefore, assuming all of the terms and milestones of this deal are met, OpenAI's GPU purchases will be largely financed through the dilution of AMD's shareholders.
Of course, anyone who buys AMD stock at today's price of about $211 and holds on will accrue a 184% return if it reaches $600, so they would probably be happy with that outcome irrespective of any dilution.
These circular deals in the AI world are becoming more common because data center infrastructure is so expensive to build. Nvidia recently agreed to invest $100 billion into OpenAI at the same time that OpenAI announced it would buy 10 gigawatts of computing capacity from the chipmaker.
In summary, some of the sales growth AMD and Nvidia will report over the next few years won't necessarily be organic, which might cause some investors to reconsider the valuations they are paying for these stocks.
Nevertheless, the OpenAI deal is huge for AMD, and the terms do offer some protections for shareholders. Therefore, AMD stock is probably a good buy right now for investors who are willing to hold it for the long term.
