AMD vs. Meta: AI Chip Deal 🤯💰
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AMD will supply 6 gigawatts’ worth of chips to buttress Meta’s AI efforts. Meta has struck a multi-billion dollar chip deal with AMD that could lead to the Facebook owner taking a 10 percent stake in the group. Shares in the US chipmaker surged on Tuesday. Meta will receive customized chips with a total capacity of 6 gigawatts from AMD as it races to develop and deploy its AI models. AMD’s chief executive Lisa Su said that “each gigawatt of compute is worth double-digit billions” under the deal. AMD also issued Meta with a performance-based warrant, giving it the option to acquire up to 160 million AMD shares in tranches at an exercise price of $0.01. The shares-for-chips arrangement represents the latest “circular” transaction in the industry and mirrors a deal AMD struck with OpenAI in October, in which the ChatGPT maker was offered a 10 percent stake in the chip group over time. This strategic alignment highlights a broader trend: major technology companies diversifying their supply chains and investing heavily in AI infrastructure, driven by projected spending this year reaching as much as $135 billion.
AMD AND META’S STRATEGIC CHIP PARTNERSHIP
AMD will supply 6 gigawatts’ worth of customized MI450 AI chips to Meta, representing a multi-billion dollar deal with the potential for Meta to acquire a 10 percent stake in the chipmaker. This significant investment underscores the growing importance of AMD in the rapidly evolving landscape of artificial intelligence. The deal, driven by Meta’s aggressive push to develop and deploy its AI models, highlights a shift in sourcing strategies within the tech industry. AMD’s CEO, Lisa Su, emphasized the value of this partnership, stating that “each gigawatt of compute is worth double-digit billions,” reflecting the immense scale and potential return on investment. This strategic alliance positions AMD as a key player in Meta’s ambitious AI infrastructure development.
A CIRCULAR TRANSACTION AND META’S AI STRATEGY
The arrangement mirrors a similar “circular” transaction AMD executed with OpenAI in October, offering the ChatGPT maker a 10 percent stake in AMD over time. This trend of tech giants acquiring stakes in chipmakers, coupled with substantial investments in AI infrastructure, raises concerns about circular financing arrangements. Meta’s commitment to almost doubling its AI infrastructure spending to as much as $135 billion this year demonstrates the scale of its ambitions. The company’s strategy involves diversifying its sourcing of chips, recognizing that a single silicon solution won’t suffice for all AI workloads. Santosh Janardhan, Meta’s head of infrastructure, articulated this approach, noting the need for Nvidia, AMD, and Meta’s own custom silicon. This multi-pronged strategy reflects a calculated risk-reward approach, aiming to optimize performance and cost-effectiveness across diverse AI applications.
FINANCIAL ARRANGEMENTS AND LONG-TERM COMMITMENT
The initial tranche of AMD shares will be delivered to Meta in the second half of this year, coinciding with the shipment of the first gigawatt of chips. The terms of the warrant are tied to escalating share price thresholds, peaking at $600 for the final tranche, expiring in February 2031. Meta’s CEO, Mark Zuckerberg, anticipates a “many-year partnership” with AMD, signaling a long-term commitment. Furthermore, Meta’s recent $30 billion bond sale exemplifies the financial resources available to fuel this ambitious infrastructure build-out. AMD’s support extends beyond chip supply; the company has provided a $300 million loan guarantee to data center builder Crusoe, highlighting a proactive approach to securing market share and solidifying its role within the broader AI ecosystem.
This article is AI-synthesized from public sources and may not reflect original reporting.