AMD Partners with OpenAI for AI Chip Supply

SAN FRANCISCO – AMD has struck a multi-year agreement with OpenAI to supply artificial intelligence chips, potentially generating tens of billions in revenue annually. This deal also includes an option for OpenAI to acquire up to approximately 10% of AMD.

On the news, AMD’s stock climbed over 34% on Monday, marking its largest one-day increase in nearly a decade and boosting the company’s market valuation by around $80 billion.

This agreement highlights the growing demand for computing power within the AI sector as companies are eager to advance technologies that rival human intelligence.

According to Forrest Norrod, AMD’s executive vice president, this arrangement is transformative, not only for AMD but also for industry dynamics as a whole.

Strengthening Partnerships

The partnership connects OpenAI, a leading player in the AI space, with AMD, a prominent competitor to Nvidia, which recently made significant investments in OpenAI.

While analysts view this as a strong endorsement for AMD’s AI capabilities, they suggest it may not significantly impact Nvidia’s market dominance, as Nvidia continues to meet high demand for its AI products.

The deal involves the deployment of hundreds of thousands of AMD’s AI chips, equating to about six gigawatts of power over several years, with operations beginning in the latter half of 2026. This power usage is comparable to that of roughly 5 million American households, or about three times the output of the Hoover Dam.

OpenAI plans to construct a one-gigawatt facility utilizing AMD’s upcoming MI450 chip series starting next year, and revenue generation from this project is expected to begin then.

AMD projects that this relationship could lead to over $100 billion in revenue over the next four years from OpenAI and additional clients. This is significant compared to the anticipated $32.78 billion in revenue for AMD this year, while Nvidia’s projected revenue stands at approximately $206.26 billion.

Leah Bennett, chief investment strategist at Concurrent Asset Management, remarked that this deal helps validate AMD’s technology, especially since it has been lagging behind Nvidia for some time.

In response, Nvidia’s shares saw a slight dip, declining over 1%.

OpenAI’s CEO, Sam Altman, mentioned that this partnership will facilitate the development of the infrastructure necessary to support the startup’s operations. However, it remains unclear how OpenAI plans to finance such a massive agreement.

Deal Insights

As part of the deal, AMD issued a warrant that allows OpenAI to purchase up to 160 million AMD shares at one cent each, contingent upon meeting specific milestones agreed upon by both parties. The initial tranche will become available after the first shipment of MI450 chips in late 2026.

Subsequent milestones include targets related to AMD’s stock price that escalate to $600 per share.

Recently, Nvidia also announced a deal to supply OpenAI with a minimum of 10 gigawatts of its systems. Unlike the arrangement with AMD—where OpenAI may hold a stake in the company—the deal with Nvidia involves a straightforward client-vendor relationship without equity involvement, according to Dan Coatsworth, head of markets at A.J. Bell.

Future Directions for OpenAI

OpenAI has been collaborating with AMD for years, offering insights into the design of earlier AI chips such as the MI300X. The company has been taking proactive steps to ensure it secures the chips necessary for its future requirements, with Altman expressing aspirations of achieving 250 gigawatts of compute by 2033.

The previous month, OpenAI entered into an agreement with Nvidia for deploying one gigawatt of their next-gen Vera Rubin processors by late 2026. Additionally, OpenAI is exploring the development of its own silicon for AI applications and has a partnership with Broadcom.

Moreover, OpenAI and its primary investor, Microsoft, have recently indicated plans to transform OpenAI into a for-profit entity. According to a source familiar with the situation, the AMD partnership does not alter OpenAI’s ongoing compute strategies or its partnership with Microsoft.