AMD-OpenAI Huge Synthetic Intelligence (AI) Deal: What Traders Ought to Know

On Monday, chipmaker Superior Micro Units (AMD 23.61%) introduced an enormous synthetic intelligence (AI) strategic partnership with OpenAI, the AI mannequin developer finest identified for its ChatGPT chatbot. Not solely did this information ship shares of AMD up a whopping 23.7%, nevertheless it additionally gave a lift to many different AI shares and the market on the whole.

AMD’s information got here precisely two weeks after its rival Nvidia (NVDA -1.10%), whose graphics processing models (GPUs) dominate the AI chip market, introduced a large take care of OpenAI.

Superior Micro Units-OpenAI strategic partnership

The AMD-OpenAI strategic partnership entails AMD supplying 6 gigawatts of its Intuition collection GPUs to energy OpenAI’s next-generation AI infrastructure. The primary 1 gigawatt deployment of AMD Intuition MI450 GPUs is about to start within the second half of 2026. That is the identical time-frame concerned within the Nvidia-OpenAI deal.

Furthermore — and that is massive for AMD — “AMD has issued OpenAI a warrant for as much as 160 million shares of AMD widespread inventory, structured to vest as particular milestones are achieved,” in keeping with the press launch. AMD has a complete of about 1.62 billion shares excellent, so 160 million shares is about 10% of whole shares.

For context, earlier than the deal was introduced, AMD had a market cap of about $267 billion. Ten p.c of that’s $26.7 billion.

Placing 6 gigawatts in context

Six gigawatts equates to a ton of computing energy. Listed below are a few stats to place 6 gigawatts of energy in context:

• New York Metropolis’s common energy demand is about 6.5 gigawatts, and its peak energy demand in the summertime is roughly 10 to 11 gigawatts.
• Six large-scale nuclear reactors have an influence output of about 6 gigawatts.

Recap of the Nvidia-OpenAI AI deal

On Sept. 27, Nvidia introduced its large take care of OpenAI. The highlights of this strategic partnership:

• The businesses plan to deploy at the least 10 gigawatts of Nvidia techniques for OpenAI’s next-generation AI infrastructure.
• The announcement said that the techniques can be used to “practice and run [OpenAI’s] subsequent technology of fashions on the trail to deploying superintelligence.” [Emphasis mine.]
• The primary part is focused to return on-line within the second half of 2026 utilizing the Nvidia Vera Rubin platform.
• Nvidia plans to take a position as much as $100 billion in OpenAI as the brand new Nvidia techniques are deployed.

What are the broader implications for the AI area?

This looks like a win-win deal for each AMD and OpenAI. OpenAI secures a big provide of AI-enabling GPUs over a number of years. That is no small factor, as GPUs are in nice demand, so provide has been tight. That is very true of Nvidia’s GPUs, however little doubt, additionally true to some extent for AMD.

On AMD’s half, it secures an enormous multiyear buyer for its GPUs, and it’s poised to get a hefty influx of money as OpenAI buys as much as 10% of AMD’s shares. The partnership “is predicted to ship tens of billions of {dollars} in income for AMD,” CFO Jean Hu mentioned within the launch. Furthermore, it is “anticipated to be extremely accretive to AMD’s non-GAAP [generally accepted accounting principles] earnings per share, ” she added.

Taken along with the latest Nvidia-OpenAI humongous AI deal and different massive offers within the area, there are constructive implications for the broader AI market.

The principle implication, for my part, is that these large AI chip and infrastructure offers ought to speed up the race to maneuver past generative AI to obtain synthetic basic intelligence (AGI) after which synthetic superintelligence (ASI), as I wrote about after the Nvidia-OpenAI deal was introduced. Nvidia and AMD needs to be two of the large beneficiaries of this race, as firms rush to purchase much more of their AI-enabling GPUs.

Beth McKenna has positions in Nvidia. The Motley Idiot has positions in and recommends Superior Micro Units and Nvidia. The Motley Idiot has a disclosure coverage.