Meta Platforms to Acquire AI Chips from AMD

Facebook’s parent company, Meta Platforms, is set to purchase artificial intelligence chips from Advanced Micro Devices (AMD). This agreement also opens the door for Meta to acquire up to a 10% share in AMD.

This news follows Meta’s recent announcement regarding a long-term collaboration with Nvidia, which will see the company utilize millions of chips and other resources from Nvidia for its AI data centers.

As part of the deal, Meta plans to buy AMD’s latest chips, specifically the MI450, intended to enhance its data center capabilities. The agreement, which encompasses 6 gigawatts of power, will commence shipments for the initial gigawatt deployment later this year. It could hold a value exceeding $100 billion.

AMD is striving to keep up with Nvidia amid an AI surge, viewed as a significant turning point in technology akin to the introduction of the iPhone by Apple co-founder Steve Jobs.

Nvidia has established a leading position by adapting its graphics processing units (GPUs) from solely gaming purposes to training advanced AI systems, like those powering ChatGPT and various image generators. As the demand for AI tools skyrockets, many tech companies find themselves racing for more chips to build and support these applications.

Despite the strong demand for AI chips, concerns linger about the extent of spending by companies like Meta on AI initiatives. There’s uncertainty whether these hefty investments will yield returns in terms of increased profits and productivity down the line.

Meta is eager to enhance its AI capabilities, especially with stiff competition from rivals such as Google and OpenAI, the latter known for ChatGPT. In June, Meta invested $14.3 billion in AI data company Scale, bringing on its CEO, Alexandr Wang, to guide efforts aimed at developing “superintelligence.” Additionally, in December, the company acquired the AI startup Manus, as it intensifies its focus on enhancing AI offerings across its platforms.

As part of the agreement, AMD has granted Meta a performance-based warrant for up to 160 million shares of its stock at a nominal price of $0.01 each, contingent on hitting specific milestones.

The first batch of shares will vest alongside the initial shipment of 1 gigawatt, with further shares becoming available as Meta’s acquisitions scale up to 6 gigawatts.

Shares of AMD experienced a rise of over 9% before the market opened on Tuesday.