AMD’s OpenAI, Meta chip deals trigger $1 billion quarterly charge

Advanced Micro Devices (AMD) has recorded a $1.07 billion non-cash charge in the third quarter of 2023, as the chipmaker's deals with major AI customers OpenAI and Meta Platforms begin to impact its finances. This charge, equivalent to 66 cents per share, stems from the warrants granted to OpenAI and Meta, which could potentially allow them to acquire up to 10% of AMD if specific milestones are met.

These deals, which include the option for OpenAI and Meta to purchase significant stakes in AMD, reflect a growing trend of equity incentives used by chip and AI cloud firms to secure long-term purchases from select AI customers. While AMD's strategy highlights the interconnected nature of the AI boom, where companies act as customers, suppliers, and investors, it also poses a risk to AMD shareholders, as the warrants could substantially dilute their ownership if fully exercised.

Analysts view these agreements as a strong endorsement of AMD's AI capabilities, but they also emphasize that Nvidia's dominance in the market is likely to persist due to its ability to meet demand.