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AMD’s OpenAI, Meta chip deals trigger $1 billion quarterly charge
AMD recorded a $1.07 billion non-cash charge linked to warrants offered to OpenAI and Meta as they commit to buying its AI chips. The charge shows how these deals are affecting AMD’s reported profits, while also highlighting the growing role of equity incentives in securing large, long-term AI orders.
AMD agreed to sell Meta up to $60 billion of chips over five years, with warrants that could give Meta as much as a 10 per cent stake; OpenAI has a similar option. The warrants carry share-price and commercial conditions, and could dilute existing shareholders if exercised. AMD forecast stronger-than-expected growth in 2027, helping lift its shares 8 per cent in extended trading, though analysts said Nvidia remains dominant.
In short
- AMD booked a $1.07 billion charge for customer warrants.
- OpenAI and Meta could each gain stakes of about 10 per cent.
- AMD expects faster-than-expected growth in 2027.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The warrants may be a commercially sensible way for AMD to secure very large, long-term chip orders from OpenAI and Meta, strengthening demand and supporting its growth ambitions in a fast-expanding AI market. Although the $1.07 billion charge reduces reported profit, it is non-cash and reflects the cost of incentives tied to future share-price and commercial conditions, rather than an immediate cash outlay.
The case against
Offering warrants that could give major customers as much as a 10 per cent stake risks diluting existing shareholders and sharing the gains from AMD’s growth with the buyers whose orders the company is trying to win. The large charge also makes reported profits harder to interpret, while the deals’ value depends on future purchases and conditions being met; AMD still faces Nvidia’s dominant position.
Explained simply
AMD designs processors, including the accelerators used to train and run artificial intelligence systems. It competes with Nvidia, whose chips are widely used by companies building large AI services.
OpenAI and Meta are among the technology companies investing heavily in computing capacity for AI. Their agreements with AMD link purchases of its chips to warrants, which give the companies the option to acquire AMD shares if specified conditions are met.
If exercised, the warrants could give OpenAI and Meta ownership stakes and reduce existing shareholders’ proportionate holdings. The arrangements also connect AMD’s financial results to the cost of securing major chip orders and to the companies’ plans for long-term AI infrastructure.