AMD shares surge on major chip deal with Meta

Advanced Micro Devices (AMD) said Tuesday it has agreed to sell up to $60 billion worth of artificial intelligence chips to Meta Platforms over five years, in a landmark deal that also gives the Facebook parent the option to purchase as much as a 10% stake in the chipmaker.

Shares of Advanced Micro Devices rose more than 10% in premarket trading after closing at $196.60 in the previous session, News.Az reports, citing Reuters.

The agreement follows a similar pact signed last year with OpenAI, which was widely viewed as a strong endorsement of AMD’s chips and software and helped drive its stock higher.

The latest wave of chip supply agreements highlights surging demand for processors across the AI sector. Meta Platforms has separately secured a deal with AMD’s larger rival, Nvidia, to purchase millions of AI chips.

The partnership reflects increasingly close ties among major AI players, even as concerns grow about circular investments and overlapping ownership structures. Meta and OpenAI are poised to take stakes in one of their key suppliers at a time when Nvidia is reportedly considering investments in some of its largest customers, including the ChatGPT parent.

AMD will supply six gigawatts’ worth of chips to Meta, beginning with one gigawatt of its forthcoming MI450 flagship hardware in the second half of this year, AMD Chief Executive Lisa Su said at a news briefing.

Investor concerns about the AI market also center on how long it may take for Big Tech’s massive infrastructure spending to generate meaningful returns. Capital expenditures by Alphabet, Microsoft, Amazon, and Meta are projected to total at least $630 billion this year, according to Reuters calculations, with the bulk directed toward data centers and AI chips.

In addition to AMD’s flagship graphics processors, Meta plans to purchase central processing units, including a customized variant tailored to its platform’s requirements. The custom CPU will be optimized to deliver strong performance while minimizing energy consumption, Su said. The deal spans two generations of AMD CPUs.

“So no question Mark is very, very ambitious in what he wants to accomplish, and we want to use every aspect of our technology to really help Meta to accomplish that,” Su said, referring to Meta CEO Mark Zuckerberg.

Meta contributed to the design of the MI450 chip, which has been optimized for inference — the process by which AI systems such as ChatGPT generate responses to user queries. Industry analysts expect the market for inference hardware to grow significantly larger than the market for training large AI models.

As part of the agreement, AMD will issue a warrant for 160 million shares at an exercise price of one cent. The warrant will vest over the life of the deal once AMD’s stock reaches progressively higher performance targets, up to $600 per share. In addition to stock price thresholds, each tranche of the warrant will depend on certain technical and commercial milestones being met by Meta.

“Meta is making a big bet on AMD,” Su said.

Meta, however, intends to continue sourcing chips from multiple vendors while also advancing its own in-house processor development, said Santosh Janardhan, the company’s head of infrastructure. The social media group has also held discussions with Google about using its tensor processors for AI workloads, according to sources.

Given the scale of Meta’s data center expansion, Janardhan said the company requires multiple chip suppliers and technology approaches.

“All of the chip makers end up having sort of a seat at the table,” he said.

News.Az 

By Nijat Babayev