AMD stock skyrockets 35% on OpenAI chip deal, Nvidia slips into the red

Shares of Advanced Micro Devices (AMD) soared about 35% on Monday after announcing a multi-year partnership with OpenAI to develop AI data centres.

The deal permits California-based OpenAI to diversify its supply of semiconductors so that it does not depend solely on US powerhouse Nvidia. Nvidia shares dipped 1.2%.

At 10:15 AM EDT, the AMD stock stood at $207.73, up 25%. Earlier, it surged about 35%.

AMD-OpenAI multi-year deal

AMD has announced a significant multi-year deal to supply artificial intelligence chips to OpenAI. The agreement is poised to generate tens of billions of dollars in annual revenue for AMD and grants the creator of ChatGPT the option to acquire a minority stake in the chipmaker.

This latest deal is a powerful testament to the voracious appetite for computing power within OpenAI and the wider AI industry, as companies race to develop AI technology that is comparable to, or surpasses, human intelligence.

The deal is a major vote of confidence in AMD's AI chips and software.

According to OpenAI CEO Sam Altman, the partnership will be crucial in helping the company build the necessary AI infrastructure to meet its expanding needs.

"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 deal covers the deployment of hundreds of thousands of AMD's Graphics Processing Units (GPUs), equivalent to six gigawatts (GW), over several years, commencing in the second half of 2026.

Financial Impact

• Due to the ripple effect of this agreement, AMD executives anticipate receiving more than $100 billion in new revenue over four years, covering sales to OpenAI and other customers.
• "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.
• AMD confirmed that OpenAI would begin building a one-gigawatt facility based on its forthcoming MI450 series chips starting next year, which is also when AMD expects to begin recognising revenue from the deal.
• As part of the arrangement, AMD issued a warrant granting OpenAI the ability to purchase up to 160 million shares of AMD for just 1 cent each over the course of the chip supply deal.