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AMD shares surged more than 24% in premarket trading on Monday after the chipmaker announced a new multibillion-dollar deal with OpenAI, in a move that looks to challenge AI giant Nvidia, which recently announced plans to acquire a 4% stake in rival Intel. <\/p>\n
OpenAI CEO Sam Altman and AMD Chair and CEO Lisa Su at a Senate Commerce Committee hearing on AI.<\/p>\n
Getty ImagesKey Facts<\/p>\n
The deal<\/a> will see OpenAI acquire and deploy 6 gigawatt worth of AMD\u2019s AI chips, starting with a 1 gigawatt deployment of AMD\u2019s Instinct MI450 GPU next year.<\/p>\n According to an SEC filing<\/a> made by AMD, the chipmaker has issued OpenAI a warrant for up to 160 million shares, roughly 10% of the company, at one cent per share, which will be vested when specific share-price milestones are met.<\/p>\n According to the filing, the shares will be vested in multiple tranches, tied to a rise in AMD\u2019s stock price\u2014which must triple to $600 for the final tranche.<\/p>\n Neither company\u2019s announcement mentioned the exact value of the deal, but AMD noted that its partnership with the ChatGPT-maker is expected to deliver tens of billions of dollars in revenue for AMD.<\/p>\n The deal is AMD\u2019s most significant win in its attempt to challenge Nvidia\u2019s dominance in the AI chip space, and also helps OpenAI reduce its dependence on Nvidia\u2019s GPUs.<\/p>\n How Has The Market Reacted To The Deal?<\/p>\n AMD\u2019s share price surged 24% to $204.50 in the premarket early on Monday, following the deal\u2019s announcement. Shares of AMD\u2019s chief rival, Nvidia, which had rise to nearly $190 in the premarket before the deal\u2019s announcement, fell to $185.47\u2014down 1.15% from Friday\u2019s close.<\/p>\n What Do We Know About Openai\u2019s Deal With Nvidia?<\/p>\n Last month, Nvidia announced<\/a> plans to invest $100 billion in OpenAI, which will allow the ChatGPT maker to deploy at least 10 gigawatts of Nvidia systems for its artificial-intelligence data centers to to \u201ctrain and run its next generation\u201d AI models. The first of these deployments is also scheduled to come online in the second half of 2026. However, unlike the Monday\u2019s, this deal has not been finalized, as Nvidia and OpenAI have only signed a letter of intent. <\/p>\n Tangent<\/p>\n The big boost for AMD comes just weeks after two of its biggest rivals, Nvidia and Intel, announced plans to collaborate on new custom data center and consumer chips that combine Intel\u2019s CPU and Nvidia\u2019s GPU. As part of the deal, Nvidia said it will acquire around $5 billion worth of Intel\u2019s shares. AMD\u2019s shares dropped after this deal was announced as it threatened to dent a critical moat the company had over Nvidia. Only AMD and Intel are licensed to manufacture x86 chips, the architecture that powers most desktops, servers and laptops around the world. However, this deal opens the doors for Nvidia\u2019s GPUs\u2014used to power AI applications and graphically intense tasks\u2014to be closely integrated with Intel\u2019s x86 CPUs.<\/p>\n Further Reading<\/p>\n