AMD signs AI chip-supply deal with OpenAI

SAN FRANCISCO, Oct 6: AMD said on Monday it will supply artificial intelligence chips to OpenAI in a multi-year deal that would bring in tens of billions of dollars in annual revenue and give the ChatGPT creator the option to buy up to roughly 10% of the chipmaker.

Shares of AMD surged more than 35% in premarket trading, putting them on track to open at their highest level since March 2024, if gains hold.

The latest deal, among a string of investment commitments, is a testament to OpenAI and the broader AI industry’s voracious appetite for computing power as companies race toward developing AI technology that meets or exceeds human intelligence.

The deal offers OpenAI an opportunity to take a stake in one of Nvidia’s most formidable rivals and is a major vote of confidence in AMD’s AI chips and software.

“We view this deal as certainly transformative, not just for AMD, but for the dynamics of the industry,” AMD executive vice president Forrest Norrod told Reuters on Sunday.

The agreement covers the deployment of hundreds of thousands of AMD’s AI chips, or graphics processing units (GPUs), equivalent to six gigawatts, over several years beginning in the second half of 2026.

AMD said OpenAI would build a one-gigawatt facility based on its forthcoming MI450 series of chips beginning next year, and that it would begin to recognize revenue then.

AMD executives expect the deal to net tens of billions of dollars in annual revenue. Because of the ripple effect of the agreement, AMD expects to receive more than $100 billion in new revenue over four years from OpenAI and other customers, they said.

“Other people are going to come along with it because this is really the pioneer, a pioneer in the industry that has a lot of influence over the broader ecosystem,” AMD strategy chief Mat Hein said.

The deal with AMD will help OpenAI build enough AI infrastructure to meet its needs, OpenAI CEO Sam Altman said in a statement.

It was not immediately clear how OpenAI would fund the massive deal with AMD.

OpenAI has generated around $4.3 billion in revenue in the first half of 2025 and has burned through $2.5 billion in cash, according to media reports, as the startup splurges on attracting top talent, while investing heavily in developing new AI tools.

Analysts, on average, estimate AMD will generate revenue of $32.78 billion this year, according to LSEG data.
As part of the arrangement, AMD issued a warrant that gives OpenAI the ability to buy up to 160 million shares of AMD for 1 cent each over the course of the chips deal. The warrant vests in tranches based on milestones that the two companies have agreed on.

The first tranche will vest after the initial shipment of MI450 chips set for the second half of 2026. The remaining milestones include specific AMD stock price targets that escalate to $600 a share for the final installment of stock to unlock.

AMD has 1.62 billion shares outstanding and is valued at $267.23 billion, according to LSEG data. Its shares closed on Friday at $164.67.

OpenAI has a valuation of $500 billion.

OpenAI chip supply deal sends AMD shares soaring

OPENAI WANTS MORE GPUs

OpenAI has worked with AMD for years, providing inputs on the design of older generations of AI chips such as the MI300X.

The San Francisco-based AI company has been taking a number of steps to ensure it has the chips needed for its future needs.

In September, Nvidia announced an investment of up to $100 billion in OpenAI that included a plan to supply at least 10 gigawatts worth of Nvidia systems. The plan includes OpenAI deploying a gigawatt of Nvidia’s next-generation Vera Rubin chips in late 2026.

Altman has floated expectations of reaching 250 gigawatts of compute in total by 2033, The Information has reported.

In addition to using Nvidia hardware, cloud computing giants such as Google and Amazon build their own in-house processors. Similarly, OpenAI is in the process of developing its own silicon for AI use and has partnered with Broadcom, Reuters reported last year.

Shares of Nvidia dipped more than 1%, while those of Broadcom fell 1.5% in trading before the bell.

OpenAI and its main backer Microsoft also announced last month that they had signed a non-binding agreement to restructure OpenAI into a for-profit entity, signaling further changes in the governance of the fast-growing AI company.

A person familiar with the matter said the deal with AMD does not change any of OpenAI’s ongoing compute plans, including that effort or its partnership with Microsoft.