AMD's OpenAI Pact Challenges Nvidia's AI Chip Supremacy

AMD shares surged over 25% in premarket trading on Monday after the chipmaker announced a landmark multi-year agreement with OpenAI to supply up to 6 gigawatts of its Instinct GPUs, with the first 1-gigawatt deployment slated for the second half of 2026. The deal includes a warrant granting OpenAI the right to purchase up to 160 million shares of AMD common stock, with vesting milestones tied to deployment progress and stock price targets. If fully exercised, the warrant could result in OpenAI acquiring a 10% stake in AMD, based on its current share count.

The partnership marks one of the largest GPU deployment agreements in the AI industry to date, positioning AMD as a core strategic partner to OpenAI. AMD executives projected the deal would generate tens of billions of dollars in annual revenue and potentially exceed $100 billion in new revenue over four years from OpenAI and other customers. The agreement also validates AMD's next-generation Instinct roadmap, which has historically trailed Nvidia in the AI accelerator market.

OpenAI CEO Sam Altman emphasized the collaboration would accelerate AI progress by leveraging AMD's high-performance chips, while AMD CEO Lisa Su described the partnership as a "true win-win" for advancing the AI ecosystem. The deal includes phased deployment milestones, with the first tranche vesting upon the initial gigawatt rollout and subsequent tranches unlocking as OpenAI scales to 6 gigawatts and meets technical and commercial targets.

The partnership adds complexity to the AI industry's circular economy, where companies like Nvidia, Oracle, and Broadcom are also supplying capital, hardware, and infrastructure for OpenAI's expanding needs. OpenAI recently announced a $100 billion equity-and-supply agreement with Nvidia, which has a valuation of $500 billion. Analysts noted the AMD deal could ease supply chain pressures for OpenAI while reducing its reliance on a single vendor.

Nvidia's stock fell 1% premarket following the announcement, reflecting competitive dynamics in the AI chip market. AMD's shares, however, surged to their highest premarket level since March 2024, driven by the scale of the deal and its implications for long-term revenue growth. The partnership also underscores OpenAI's aggressive infrastructure expansion, including upcoming data center builds in New Mexico, Ohio, and the Midwest that will incorporate a mix of suppliers.

Source: [1] OpenAI looks to take 10% stake in AMD through AI chip deal - CNBC (https://www.cnbc.com/2025/10/06/openai-amd-chip-deal-ai.html?msockid=3faa758a7e3462ee266363f77f396380) [2] AMD signs AI chip-supply deal with OpenAI, gives it option to take ... (https://www.reuters.com/business/amd-signs-ai-chip-supply-deal-with-openai-gives-it-option-take-10-stake-2025-10-06/)