The OpenAI and AMD deal sent the chipmaker's stock to a one-year high. What does it change?

Shares of chip maker Advanced Micro Devices soared nearly 30% to a one-year high, nearing a record high. The rally began after news of AMD's deal with ChatGPT developer OpenAI, which provides for tens of billions of dollars worth of AI processors and gives OpenAI the opportunity to get up to 10% of the chipmaker's shares. For AMD, this is an opportunity to take a more prominent place in an industry dominated by Nvidia.

AMD's capitalization rose by 29% during trading on October 6, thus the company's value for the first time in more than a year approached the record level for it, set in March 2024, CNBC shows . At the same time, the stock showed the most significant one-day growth in AMD's history, Barron's calculated .

It all comes after OpenAI and AMD announced a long-term agreement that will make the chipmaker its second key supplier of chips for building artificial intelligence infrastructure, Barron's reports . The ChatGPT developer will buy billions of dollars worth of GPUs from AMD for a total capacity of 6 gigawatts, the Financial Times wrote. The exact amount of the deal is not disclosed, but running 1 GW of capacity costs about $50 billion, of which two-thirds is for chips and infrastructure, the FT quotes OpenAI estimates.

In addition, the agreement could eventually give the ChatGPT developer the right to take a 10 percent stake in the chipmaker. AMD has granted OpenAI a warrant to purchase up to 160 million shares at a symbolic price of $0.01, the publication points out. The opportunity will be realized gradually - as AMD reaches certain targets for growth in the value of securities, and OpenAI will put into operation its chips. Such a package corresponds to about 10% of the company's capital, the FT points out.

For now, AMD remains well behind Nvidia in the market for so-called gas pedal chips, but the company sees the partnership with OpenAI as a source of significant revenue starting next year with acceleration in 2027, Bloomberg explains .

AMD executives said the partnership with OpenAI will allow the chipmaker to eventually reach tens of billions of dollars in annual revenue and collectively generate more than $100 billion in chip sales over the next few years. By comparison, analysts on average forecast the company's revenue at $32.78 billion this year, according to LSEG data cited by Reuters.

The company hopes that the agreement will be a springboard for wider adoption of its products, which could increase its revenue even more over time. Importantly, the deal will ensure AMD's technology is among the key solutions in the market at a time when not only OpenAI but also other major data center owners are pouring billions of dollars into expanding AI capacity, Bloomberg believes. The company is looking to close the technology gap with its competitors and has already received orders from customers such as Microsoft and Meta, the FT recalls.

On OpenAI's part, the commitment to partner with AMD may also be an attempt to create a more sustainable alternative to Nvidia's dominance, Bloomberg suggests. Nvidia recently announced that it would invest up to $100 billion in developer ChatGPT to build data center infrastructure for AI. In September, OpenAI pledged to purchase $300 billion worth of computing capacity from Oracle over the next five years and, together with Oracle, SoftBank and other partners, plans to build 7 gigawatts of additional power capacity in the U.S. data centers. In addition, according to The Wall Street Journal, the company is working with Broadcom to develop its own AI chips.

AMD's agreement with OpenAI has become one of the largest deals to supply graphics processors for AI, CNBC writes. However, it also reinforces an increasingly closed ecosystem where capital, stakes and computing power circulate within a small circle of companies that both build and service the technology, the channel notes. Nvidia provides capital to buy its own chips, Oracle helps build data centers, AMD and Broadcom act as suppliers, and OpenAI provides demand. It's a tightly intertwined system, and analysts warn that if one link in the chain weakens, the whole structure could experience serious strain, CNBC warns.

AMD's agreement with OpenAI supported the "bull" market, causing a rally in shares of chip makers, which lifted stock indexes to new all-time highs, Bloomberg notes . S&P 500 showed growth for the seventh day in a row - the longest such series since Ma, the agency calculated. The semiconductor index jumped 4%, while Nvidia shares fell 1.4%, but then recovered most of the fall.

"The announcement that AMD is entering into a 'tens of billions of dollars' partnership with OpenAI was certainly a key catalyst [for the sector]," Matt Maley of Miller Tabak told Bloomberg. - The investment excitement around the AI phenomenon has gotten another boost."

This article was AI-translated and verified by a human editor