AMD has entered into a strategic five-year agreement with OpenAI, marking a significant milestone in the competitive AI chip market. This deal will supply OpenAI with hundreds of thousands of AMD GPUs, allegedly amounting to around six gigawatts, sufficient to energize approximately 5 million US homes. The partnership is projected to generate tens of billions in revenue for AMD, whose stock surged nearly 38%. In exchange, OpenAI will receive warrants to acquire up to 10% of AMD stock at a minimal price as performance milestones are achieved.
While Nvidia dominates the AI chip market, controlling over 70%, the demand for AI processing power paves the way for AMD to assert its presence. OpenAI is simultaneously exploring synergies with Broadcom and Oracle to diversify its AI capabilities. The recent surge in AI-related expenditure raises questions about sustainability, as OpenAI CEO Sam Altman emphasizes the urgent need for computing power amidst an industry experiencing rapid growth.
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