AMD gives OpenAI option to acquire 10 per cent stake in multi-year deal

Chipmaker AMD said on Monday that it will supply artificial intelligence chips to Sam Altman-led OpenAI. The deal could potentially give the ChatGPT creator the option to buy up to roughly 10% of AMD. This deal has sent out a message that OpenAI, a pioneerin consumer-facing artificialintelligence, has confidence in the chips developed by Advanced Micro Devices (AMD).

AMD executive vice president Forrest Norrod told Reuters that this deal wascertainly transformative for the entire industry. After the announcement, AMD's shares witnessed a massive jump of 25 per cent in premarket trading.

Per the deal,OpenAI will build a one-gigawatt facility based on its forthcoming MI450 series of chips beginning next year.

AMD expects that it will earn revenue in to tune of $100 billion over the next four years from OpenAI and others.

"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 told Reuters.

AMD will help OpenAI build AI infrastructure.

What's the AMD-OpenAI shares deal?

AMD has issued a warrant that gives OpenAI the ability to buy up to 160 million shares of the company over the course of the deal. These shares will be sold in tranches based on milestones that the two companies intend to achieve.

The first tranche of the shares will be vested in OpenAI during the second half of 2026, after the initial shipment of MI450 chips. AMD is valued at a whopping $267.23 billion. OpenAI has a valuation of $500 billion.

OpenAI has taken numerous steps to ensure the supply of chips in consonance with the company's AI-visioned future. In September, Nvidia announced an investment of up to $100 billion.

The company is also attempting to design its own AI chips with which it has partnered with Broadcom.