AMD's OpenAI, Meta chip deals trigger $1 billion quarterly charge
AMD in February agreed to sell up to $60 billion worth of AI chips to Meta over five years, giving the Facebook owner warrants that could let it buy as much as 10% of the chip firm if it meets certain milestones. The deal followed a similar agreement with OpenAI last year, giving the startup the option to buy up to roughly 10% of the chipmaker.
Advanced Micro Devices (AMD) has entered into agreements with major AI customers OpenAI and Meta Platforms, offering them stakes in the chipmaker in exchange for substantial chip commitments. These deals, totaling up to $60 billion in AI chip sales over five years, come with warrants that could allow OpenAI and Meta to purchase up to 10% of AMD if certain milestones are met.
In the third quarter ended September 26, AMD recorded a $1.07 billion non-cash charge, or 66 cents per share, to account for these warrants as shipments begin to increase. This strategy of using equity incentives to secure long-term purchases is becoming increasingly common among chip and AI cloud companies. While AMD's shares rose 8% following the news, analysts believe that while the warrants reflect confidence in AMD's AI chips and software, it is unlikely to challenge Nvidia's dominance.
The warrants could dilute AMD shareholders significantly if they are fully exercised, potentially increasing the company's share count substantially.
Written by urgent.news from Economic Times Tech's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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