Meta Platforms has agreed to buy 6 gigawatts’ worth of artificial intelligence computing power from Advanced Micro Devices in a deal valued at more than $100 billion that could result in Meta owning as much as 10% of AMD’s stock.
The deal, announced by the companies Tuesday, represents a coup for AMD in its effort to challenge Nvidia in the market for selling graphics processing units, or GPUs—the microchips powering the AI boom.
Under Tuesday’s agreement, Meta will buy enough of AMD’s latest chips, known as the MI450 series, to power data centers using up to 6 gigawatts of computing power over the next five years. Each gigawatt of computing power means several tens of billions of dollars in revenue for AMD, the company said. Meta is expected to deploy the first gigawatt starting later this year.
As part of the arrangement, AMD has agreed to give Meta warrants to buy up to 160 million AMD shares—or roughly 10% of the company—for $0.01 apiece, as long as certain milestones are met.
The full stock award is conditional on a rise in AMD’s share price. Meta would only receive the final tranche of shares once AMD’s stock hits $600. It closed at $196.60 Monday.
With a limited number of large buyers of their chips, both Nvidia and AMD have been using novel financing mechanisms to lock key customers into long-term agreements to use their technology.
In October, AMD struck a deal with OpenAI that had terms almost identical to those of the Meta partnership. Both deals are examples of what critics have dubbed “circular financing,” an arrangement under which one company pays another company, which turns around and buys products or services from the first company.
As the AI boom has intensified and the sums of money going into these deals has skyrocketed, investors have been rewarding chip companies for every large purchase order they announce, even if they involve circular financing.
AMD Chief Executive Lisa Su said in a briefing with reporters ahead of Tuesday’s announcement that the deal is meant to counter competitors like Nvidia. As large customers such as Meta increase spending on AI infrastructure, AMD is seeking to lock them into using its chips for as long as possible.
“Meta has a lot of choices,” Su said. “I want to make sure that we are always a clear seat at the table when they think about what they need next.”
Last week, Meta said it would buy several million of Nvidia’s GPUs as well. That deal, which is expected to cost tens of billions of dollars, is meant to accelerate the Facebook and Instagram owner’s Meta Compute effort, under which the company is planning to increase capital spending on AI computing to develop large language models and further optimize its ad business.
Meta plans to deploy “tens of gigawatts” of data center computing power this decade and “hundreds of gigawatts or more over time,” Chief Executive Mark Zuckerberg wrote in a social-media post in January. The company spent $72 billion last year to build out AI data centers and plans to spend as much as $135 billion this year.
Meta attributed record revenue in the most recent quarter to AI and said it expected sales to rise even more sharply in the current quarter.
Tuesday’s deal is also one of the first examples of AMD selling what it describes as custom AI chips that are designed specifically for the computing tasks the customer wants to perform.
“This is an important step for Meta as we diversify our compute,” Zuckerberg said in a statement. “I expect AMD to be an important partner for many years to come.”
In the past, AMD has usually sold “off the shelf” GPUs, or general-use AI chips that aren’t tailored for any specific workload. Its latest AI chip, known as MI450, is easier to customize because it uses a design architecture that integrates several tiny, interconnected bits of silicon known as chiplets, rather than relying on a single, monolithic silicon die as its main processor.
Meta wants to optimize its AMD chips for inference, or the process by which an AI model responds to user queries. The arrangement with Meta thrusts AMD into more direct competition with Broadcom, the world’s biggest designer of the custom chips.
Write to Robbie Whelan at robbie.whelan@wsj.com and Meghan Bobrowsky at meghan.bobrowsky@wsj.com