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AMD to supply OpenAI hundreds of thousands of AI chips

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Deal includes warrant for OpenAI to buy up to 10% AMD

stake at 1

cent per share

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AMD expects more than $100 billion revenue from OpenAI,

others

as a result of deal

By Max A. Cherney

SAN FRANCISCO, Oct 6 (Reuters) - 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.

The deal offers OpenAI an opportunity to take a stake in one

of Nvidia's ( NVDA ) most formidable rivals and is a powerful

endorsement of Advanced Micro Devices' ( AMD ) 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.

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 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 ( NVDA ) announced an investment of up to $100

billion in OpenAI that included a plan to supply at least 10

gigawatts worth of Nvidia ( NVDA ) systems. The plan includes OpenAI

deploying a gigawatt of Nvidia's ( NVDA ) next-generation Vera Rubin

chips in late 2026.

In addition to using Nvidia ( NVDA ) hardware, cloud computing giants

such as Alphabet's Google and Amazon ( AMZN ) 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 ( AVGO ), Reuters reported last year.

OpenAI and its main backer Microsoft ( MSFT ) 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 ( MSFT ).

(Reporting by Max A. Cherney in San Francisco; Additional

reporting by Deepa Seetharaman in San Francisco; Editing by

Muralikumar Anantharaman)