After AMD and OpenAI expanded their partnership recently, OpenAI sought an unusual way to finance its AMD purchases. Interestingly, AMD’s own stock will be part of this deal.
To summarize, OpenAI plans to acquire and utilize 6 gigawatts of computing power from AMD over several years, also assisting AMD in enhancing its competitive Instinct GPUs against Nvidia. This agreement is expected to generate billions in revenue for AMD.
However, OpenAI won’t be drawing from its own funds for this. Instead, AMD will provide OpenAI with rights to acquire a significant number of shares—up to 160 million—awarded in several phases contingent on reaching specific milestones. These milestones notably include an increase in stock value, with the final milestone hinging on AMD’s stock reaching $600 per share. Before the announcement, AMD’s shares were around $165 but jumped to $214 by the end of the trading day.
If the stock hits that target, and OpenAI meets its obligations without prematurely selling any shares, it could amass enough stock to buy a considerable number of GPUs. The stock’s potential value could reach nearly $100 billion.
UBS analyst Timothy Arcuri mentioned that achieving the final vesting milestone would require approximately $1 trillion in market capitalization, suggesting that if OpenAI holds onto its shares, they could end up being worth around $100 billion.
Yet, Arcuri also believes that OpenAI might sell some AMD stock along the way to cover costs, meaning this arrangement effectively gives AMD a means to finance OpenAI’s purchase.
Despite this, Arcuri implies that this partnership validates the capability of AMD’s AI GPUs to handle workloads from OpenAI and other AI tasks, which may encourage AMD’s adoption further. The endorsement from OpenAI could enable AMD to market its GPUs to many cloud providers that already use its CPUs.
Ultimately, it appears that retail and institutional investors will bear the cost of OpenAI’s significant multi-year GPU acquisition from AMD, if that indeed raises AMD’s stock price.
Meanwhile, Nvidia is also backing OpenAI’s purchase of its own products through a variety of investments totaling $100 billion, which was announced last month. The key difference is Nvidia’s stake in OpenAI positions it differently, unlike the reverse dynamic in the AMD deal.
