Any questions about the durability of the AI revolution can be set aside for today after Advanced Micro Devices (AMD) and ChatGPT operator OpenAI announced a deal to collaborate on the construction of AI data centers to be run on AMD chips.
AMD stock soared as much as 37.6% Monday, and semiconductor stocks, as represented by the iShares Semiconductor ETF (SOXX), were up nearly 4%. Nvidia (NVDA) was down more than 1%, its dominant position in the ongoing AI infrastructure buildout somewhat undermined.
AMD CEO Dr. Lisa Su said in a statement that the agreement will support "the world's most ambitious AI buildout." OpenAI CEO Sam Altman said the partnership with AMD "is a major step in building the compute capacity needed to realize AI's full potential."
According to terms of a strategic partnership announced by both parties, OpenAI will buy 6 gigawatts' worth of AMD chips, beginning with AMD's next-generation MI450 processor set for deployment in the second half of 2026.
The companies did not provide an estimated total value for the agreement, though Dr. Su said in an interview with The Wall Street Journal that the deal will generate tens of billions of dollars in new revenue for AMD over the next five years.
Advanced Micro Devices has also granted OpenAI a warrant for as many as 160 million AMD shares, approximately 10% of its outstanding stock, at a price of 1 cent per share. Vesting is tied to a rising AMD share price.
As Dr. Su explained, "OpenAI actually has to do a lot of work to make sure our deployments are successful. We wanted to make sure they were motivated in the sense that OpenAI would be motivated for AMD to be successful."
AMD CFO Jean Hu said the agreement "is expected to be highly accretive to AMD's non-GAAP earnings-per-share." AMD stock had already risen more than 36% for the year to date through the closing bell on Friday, October 3.
"We are in a phase of the build-out where the entire industry's got to come together and everybody's going to do super well," Altman said. "You'll see this on chips. You'll see this on data centers. You'll see this lower down the supply chain."
"The AI narrative continues to gain momentum," said Louis Navellier of Navellier & Associates. "This gives some competition for NVIDIA, which currently dominates AI chips, and accelerates the timeline for data center buildouts. "
