AMD shares surge 25% on chip supply deal with OpenAI
What's the story
Advanced Micro Devices (AMD) has signed a multi-year deal to supply artificial intelligence (AI) chips to OpenAI. The agreement is expected to generate tens of billions of dollars in annual revenue for AMD and also gives OpenAI the option to acquire up to 10% stake in the chipmaker. The deal is a major endorsement of AMD's AI chips and software, and it comes as part of the company's effort to expand its footprint in the rapidly growing AI market.
Market reaction
AMD's stock jumps 25% in premarket trading
Following the announcement of this landmark deal, AMD's shares surged by 25% in premarket trading. "We view this deal as certainly transformative, not just for AMD, but for the dynamics of the industry," said Forrest Norrod, AMD's executive vice president. The agreement involves deploying hundreds of thousands of AMD's AI chips or graphics processing units (GPUs), equivalent to six gigawatts over several years starting from H2 2026.
Facility setup
OpenAI to set up 1-gigawatt facility using AMD's chips
As part of the deal, OpenAI will set up a one-gigawatt facility using AMD's next-generation MI450 series of chips starting next year. This move is expected to start generating revenue for AMD from that point onward. The company anticipates that this deal will bring in more than $100 billion in new revenue over four years from OpenAI and other customers due to its ripple effect.
CEO statement
Deal follows NVIDIA's $100B investment commitment to OpenAI
OpenAI's CEO Sam Altman said that the deal with AMD would help his company build enough AI infrastructure to meet its needs. The agreement comes after NVIDIA announced plans to invest up to $100 billion in OpenAI and supply at least 10 gigawatts worth of its systems. Notably, OpenAI has also been working on developing its own silicon for AI use and has partnered with Broadcom for this purpose.