OpenAI gets a stake in AMD stock.
Shares of Advanced Micro Devices (NASDAQ:AMD) stock were soaring on Monday, up about 24% after it struck a partnership with AI leader OpenAI.
Specifically, AMD has been tapped to power OpenAI’s next generation of AI infrastructure by providing 6 gigawatts of AI chips over time. The first gigawatt deployment will be of AMD Instinct MI450 GPUs. This first wave is set to launch in the back half of 2026.
AMD is the leading rival of Nvidia (NASDAQ:NVDA) in making GPUs, or graphics processing units, yet Nvidia has a dominant market share in this space. Nvidia stock was down about 1% on Monday.
OpenAI, which owns ChatGPT, has long been a partner with Nvidia and its AI chips. It recently struck a deal with Nvidia for 10 gigawatts of its GPUs. But this new deal with AMD is seen as a move to diversify its supply chain beyond one major provider.
OpenAI gets 10% stake in AMD
With this new long-term deal, AMD will serve as a core strategic compute partner to drive large-scale deployments. In turn, OpenAI will get a stake in AMD of up to 160 million shares, or 10% of the company. The agreement is structured to vest as specific milestones are achieved.
The first tranche vests with the initial 1 gigawatt deployment with additional tranches vesting up to 6 gigawatts of purchases. In addition, vesting is tied to AMD achieving certain share-price targets and OpenAI achieving certain technical and commercial milestones.
“We are thrilled to partner with OpenAI to deliver AI compute at massive scale,” Lisa Su, chair and CEO of AMD, said. “This partnership brings the best of AMD and OpenAI together to create a true win-win enabling the world’s most ambitious AI buildout and advancing the entire AI ecosystem.”
The deal is anticipated to bring tens of billions in revenue to AMD over time and be “highly accretive” to AMD’s earnings.
“This partnership is a major step in building the compute capacity needed to realize AI’s full potential,” Sam Altman, co-founder and CEO of OpenAI, said. “AMD’s leadership in high-performance chips will enable us to accelerate progress and bring the benefits of advanced AI to everyone faster.”
Analysts are bullish
AMD stock has performed well this year, up about 68% YTD. Its P/E ratio has skyrocketed to over 100 during the surge, but its forward P/E based on expected earnings over the next 12 months is a reasonable 28.
Analysts are certainly bullish on the deal, as AMD stock got a slew of massive price target upgrades on Monday.
Both Melius and Barclays boosted it by $100 to $300 per share, while Roth and Stifel each raised their AMD targets by $50 to $250 per share and $240 per share, respectively. The stock is currently trading at $203 per share, so the raises suggest roughly 18% to 47% upside.
