AMD Signs AI Chip-Supply Deal With OpenAI in a Blow to Nvidia

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 most formidable rivals and is a powerful endorsement of Advanced Micro Devices' (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 recognise 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 instalment 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.

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