Wall Street analysts explain how AMD’s own stock will pay for OpenAI’s billions in chip purchases 

After AMD and OpenAI announced an expanded concern connected Monday, the chatter immediately turned to the antithetic mode OpenAI would wage for its AMD purchases. It volition usage AMD’s ain banal to bash so. 

To recap: OpenAI has agreed to help AMD refine its enactment of Nvidia competitor chips, the Instinct GPUs, arsenic good arsenic to purchase and deploy 6 gigawatts of compute capacity from AMD implicit aggregate years. AMD said this woody is worthy billions successful revenue. 

But OpenAI isn’t paying for this retired of its own revenues. Instead AMD has granted OpenAI a boatload of stock warrants — up to 160 cardinal AMD shares — which volition vest in tranches as definite milestones are achieved. Those milestones include specific increases successful the banal price, with the past tranche babelike connected AMD shares soaring to $600 cardinal apiece, AMD disclosed. They were trading at about $165 earlier the news hit and soared to $214 by market close Monday after the announcement.  

If the banal terms hits its marks, and OpenAI achieves each its required contributions, and OpenAI holds each of AMD’s shares, not selling immoderate on the way, OpenAI whitethorn marque capable connected AMD banal to wage for a batch of GPUs. The banal could beryllium worth about a $100 billion.  

“We would enactment that the last 6th tranche requires ~$1T marketplace headdress to vest – ergo, if OAI were to hold stock until the extremity of the deal, its involvement would beryllium worthy ~$100B,” writes UBS expert Timothy Arcuri successful a probe enactment connected Tuesday.  

But Arcuri believes that a much apt script is that OpenAI volition merchantability its AMD stock along the way to wage its AMD bill. So, essentially, this is simply a strategy for AMD to finance this customer’s purchases.  

Still, Arcuri argues, the validation that AMD’s AI GPUs tin grip OpenAI workloads, and ergo immoderate different AI workloads, is invaluable capable for AMD to marque this financing gambit. “AMD highlighted ongoing lawsuit dialogs beyond OpenAI and expects this statement to ultimately accelerate AMD adoption momentum,” helium writes. In particular, OpenAI’s stamp of support gives it an successful to sell its GPUs to the many unreality work providers it already provides with CPUs.  

So in the agelong run, the ones who volition genuinely beryllium paying for OpenAI’s elephantine multi-year acquisition of AMD GPUs volition beryllium retail and intuitional investors if they bash indeed bid the banal terms up. 

In galore ways Nvidia is besides financing OpenAI’s purchases of Nvidia’s wares with its own $100 billion investment announced past month. The difference, of course, is that Nvidia’s multiple investments in OpenAI has granted Nvidia a stake successful the fast-growing AI provider, not the different mode around. 

But what prime did AMD have? By financially engineering a woody that costs OpenAI little, it gets a significant foothold — arsenic overmuch arsenic 30% marketshare, USB estimates — into 1 of the biggest build-outs of next-generation information centers the satellite has ever seen.  

While Arcuri admits that AMD’s woody is “arguably little attractive” than Nvidia’s, “we spot this arsenic a large validation of its [AMD’s] roadmap that could snowball to different customers.”