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AMD's massive OpenAI deal

What’s going on — the deal details

1. Supply & deployment commitment
   • AMD will supply GPUs (AI accelerators) to OpenAI over multiple years, targeting a total deployment of 6 gigawatts (GW) of compute. 
   • The first tranche — 1 GW — is expected to be delivered in the second half of 2026. 
   • AMD expects the deal to generate “tens of billions” in revenue, and suggests that over 4 years, AMD (including other customers) might see $100 billion+ in “new revenue.” 
2. Warrants / option for OpenAI to take equity
   • As part of the agreement, AMD has issued warrants to OpenAI that allow it to buy up to 160 million shares of AMD at a strike (exercise) price of $0.01 per share (yes, one cent). 
   • These warrants vest in tranches based on achieving specific deployment and stock-price milestones (some tranches require AMD’s share price to hit up to $600/share). 
   • If fully exercised, those warrants could correspond to about 10 % of AMD’s share count (i.e. OpenAI becoming a ~10% stakeholder). 
3. Timing & risk
   • The financial recognition (i.e. revenue recognition) from this deal is not expected until 2026 onward, given the deployment timeline. 
   • AMD’s own statements imply that the deal is “transformative” for its AI business, but it also hinges on AMD executing technologically (e.g. with their upcoming MI450 hardware), and scaling the infrastructure reliably. 
4. Strategic and competitive implications
   • It gives AMD higher visibility and credibility in the AI compute / infrastructure market, positioning it as a more serious challenger to NVIDIA. 
   • For OpenAI, the deal diversifies their sourcing of compute (less reliance on a single supplier), gives them upside exposure to AMD if things go well, and aligns incentives with AMD’s success. 
   • On the flip side, the warrant terms are extremely favorable to OpenAI (very low strike, milestone-based vesting)—so AMD is giving away quite a bit of optionality.

How this deal could affect AMD’s valuation (positively) 

Potential upside levers

1. Huge incremental revenue / margin expansion
   • If AMD is indeed able to realize “tens of billions” per year from this deal + downstream demand, that’s a material lift to its revenue base.
   • As AI compute (training + inference) scales, margins often expand (scale, tooling, software leverage) — AMD could benefit from margin expansion if it can control costs and efficiency.
2. Multiple expansion / re-rating
   • A successful, high-scale AI business (especially tied to a marquee client like OpenAI) could shift investor perception of AMD from “chip / commodity competitor” to a leading AI infrastructure play. That might justify a higher P/E or EV/EBITDA multiple than what it trades at today.
   • As AMD becomes more core to AI infrastructure, it might command premium valuations similar to what NVIDIA or other “AI / compute platforms” get.
3. Ecosystem effects & optionality
   • The OpenAI deal may lead to greater adoption by other AI firms, cloud providers, and AI startups — network effects in this space matter.
   • AMD’s ability to integrate vertically (hardware + software + systems) gives optionality to capture more “value up the stack.”
4. Credibility and competitive stance
   • Beating or competing credibly with NVIDIA in the AI compute market could shift competitive dynamics, attract partnerships, and reduce AMD’s perception as a “second fiddle.”
   • It may also help AMD in negotiating supply, getting better contracts, attracting engineering talent, and integrating with large-scale AI customers.