Advanced Micro Devices Inc (AMD) yesterday signed a deal with OpenAI for artificial intelligence (AI) infrastructure that could generate tens of billions of dollars in new revenue.
The two signed a definitive agreement for OpenAI to deploy 6 gigawatts of AMD graphics processing units (GPUs) over multiple years, the companies said in a statement.
AMD has given OpenAI a warrant for as many as 160 million shares which will vest as milestones are achieved. Those targets require AMD’s stock price to continue to increase in value and future exercise points include a tranche tied to a share price of US$600. AMD shares closed Friday at US$164.67.
Photo: Justin Sullivan and Jack Guez, AFP
The agreement is the latest huge data center deal for OpenAI as the AI start-up builds out more computing capacity — an unprecedented bet by the technology industry that runaway demand for power-hungry AI tools will continue unabated.
Last month, Nvidia Corp said it would invest as much as US$100 billion in OpenAI to build AI infrastructure and new data centers with a capacity of at least 10 gigawatts of power, equal to the peak electricity demand of New York City.
It’s unclear how exactly OpenAI will finance the enormous costs associated with the chips and data centers needed to build and run more advanced AI systems. Two months ago, OpenAI chief executive officer Sam Altman said he wants to spend “trillions” on infrastructure to secure the computing resources he thinks the company needs for AI services. To bankroll that, Altman said his company is working to devise a “new kind” of financial instrument, without providing details.
Concerns over an AI bubble that could rival the dot-com craze of the late 1990s, which ended in a spectacular crash and a wave of bankruptcies, have grown as multibillion-dollar AI chip and data center deals proliferate globally. The financing is coming from venture capital, debt and, lately, some more unconventional arrangements that have raised eyebrows on Wall Street.
For AMD, the deal keeps its technology in the mix as OpenAI and other owners of large-scale data centers funnel billions toward expanding AI capacity. The chipmaker remains a distant second to Nvidia in the market for so-called accelerator chips.
AMD, whose AI GPU revenue is projected to reach US$6.55 billion this year, sees the tie up with OpenAI as lucrative beginning next year and accelerating in 2027. It’s also going to provide a springboard to greater adoption of its technology that could take its revenue from the area to above US$100 billion, executives said, without specifying a time frame.
“Our partnership with OpenAI is expected to deliver tens of billions of dollars in revenue for AMD while accelerating OpenAI’s AI infrastructure buildout,” AMD chief financial officer Jean Hu (胡錦) said in a statement. “This agreement creates significant strategic alignment,” she said, adding that it would boost AMD’s earnings per share.
AMD CEO Lisa Su (蘇姿丰) said the company was “thrilled to partner with OpenAI to deliver AI compute at massive scale.” Altman called the partnership “a major step in building the compute capacity needed to realize AI’s full potential,” adding that AMD’s “leadership in high-performance chips” would help OpenAI bring its technology to more people faster.
For the start-up, the commitment to AMD may help foster a more robust alternative to the ubiquity of Nvidia’s technology. OpenAI and data center operators spend a huge portion of their infrastructure budgets on technology from that company. Nvidia’s data center division alone has more revenue than any other chipmaker has in total. In its latest financial year, the unit more than doubled to US$115 billion in sales and is on course to show similar growth in the current period.
AMD and OpenAI said the first tranche of warrants will vest when the first gigawatt of computing is deployed, a build which will start in the second half of next year. Those computers will be based on AMD Instinct MI450 chips. Additional portions will vest as further hardware is put in place.
In addition, “vesting is further tied to AMD achieving certain share-price targets and to OpenAI achieving the technical and commercial milestones required to enable AMD deployments at scale,” the release said.
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