OpenAI has struck a multibillion-dollar deal with AMD to buy GPUs, but it will pay not in cash but in AMD shares that could rise to $100 billion.
OpenAI to buy AMD GPUs, paying in shares instead of cash
After Monday’s announcement of an expanded partnership between AMD and OpenAI, the market immediately exploded with discussion of the unusual payment method. Instead of cash, OpenAI will receive up to 160 million AMD shares, which will gradually vest after reaching a number of price and technical indicators.
It is a multibillion-dollar deal under which OpenAI will help AMD improve its Instinct GPUs — competing chips to Nvidia — and will buy 6 gigawatts of computing power from AMD over several years.
Paying with Stock: Financial Engineering That Benefits Both Parties
AMD is effectively financing its own customer, allowing OpenAI to pay for the GPUs through future stock appreciation.
UBS estimates that if AMD reaches a market cap of about $1 trillion and OpenAI keeps all of its shares, its stake could be worth about $100 billion.
UBS analyst Timothy Arcuri believes that OpenAI will likely sell its shares gradually, using the proceeds to pay for GPU shipments.
“This is essentially a scheme to finance the buyer from within the company,” Arcuri said.
Why AMD did this
Despite the risks, AMD is getting a priceless benefit: recognition of its technology from OpenAI, one of the most demanding customers in the AI world. This opens the door to large-scale contracts with cloud services to which it already supplies CPUs.
UBS estimates that the deal could give AMD up to 30% of the AI-GPU market, which is still almost entirely controlled by Nvidia.
Nvidia and AMD: Different Approaches to the Same Goal
Last month, Nvidia invested $100 billion in OpenAI, securing a stake in the company. AMD, on the other hand, is giving up a stake to gain a foothold in the AI infrastructure supply chain.
Experts note that the AMD deal looks “less attractive,” but it is a powerful strategic bet that could turn into a domino effect in attracting other large customers.
Related: Nvidia to Invest $100 Billion in OpenAI, Uniting Two AI Giants
