AMD's stock soars to its best day in a year. Here's why OpenAI wants a stake.

By Britney Nguyen

AMD got a big endorsement in the form of a multiyear chip deal with OpenAI, which was also issued a warrant to purchase up to 160 million AMD shares

OpenAI CEO Sam Altman and AMD CEO Lisa Su at a Senate committee hearing in Washington in May.

Advanced Micro Devices Inc.'s stock saw its highest close since March 2024 on Monday after the news that OpenAI plans to deploy AMD's chips to support the massive amount of computing power it needs for its AI-infrastructure buildout.

Under a multiyear agreement announced on Monday morning, AMD (AMD) said OpenAI will deploy 6 gigawatts' worth of multiple generations of its graphics processing units, which will be used for training and running OpenAI's next-generation AI models. The first gigawatt will be powered by AMD's Instinct MI450 series of chips and Helios rack-scale AI systems, and is expected to be deployed in the second half of next year, AMD said in a statement.

Shares of AMD were up 23.7% at the market close on Monday, but had traded higher during the day, briefly putting it on pace for its largest one-day gain since April 2016 , according to Dow Jones Market Data. AMD's market cap rose $63.36 billion, its largest single-day gain on record, to end the day at $330.6 billion, its second-highest point ever, Dow Jones data said. The stock was the best performer in both the S&P 500 and Nasdaq 100 on Monday, the data showed.

AMD has also issued the AI startup a warrant to buy up to 160 million shares of its common stock at 1 cent per share, which will vest as the companies reach specific milestones in the agreement. That would amount to just under 10% of AMD, based on the number of outstanding shares.

The first vesting is expected when the first gigawatt is deployed, AMD said, adding that vesting is also dependent on the company reaching certain share-price targets. OpenAI, too, has to reach "technical and commercial" goals under the agreement, it noted. According to a securities filing on Monday, the warrant structure is set up to last five years.

"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," AMD Chief Executive Lisa Su said in a statement.

AMD is expected to see tens of billions of dollars in revenue through the partnership, AMD Chief Financial Officer Jean Hu said in a statement.

Revenue from the partnership is expected to begin in the second half of 2026, Su said on a call with Wall Street analysts and investors on Monday morning. She added that the deal "gives us a clear line of sight to achieve our initial goal of tens of billions of dollars of annual data-center AI revenue starting in 2027."

OpenAI CEO Sam Altman, who recently received a $100 billion investment from AMD rival Nvidia Corp. (NVDA), said in a statement that "AMD's leadership in high-performance chips will enable us to accelerate progress and bring the benefits of advanced AI to everyone faster."

The AI startup is also planning to deploy 10 gigawatts' worth of Nvidia's GPUs through its agreement with the chip maker, which saw its stock dip about 1% after the news.

OpenAI President Greg Brockman told CNBC's "Squawk on the Street" on Monday that the deal with AMD "is so core to our mission if we really want to be able to scale to reach all of humanity." Brockman told the program that OpenAI's lack of computing power is holding the company back from launching more features and products that can generate more revenue.

See more: Why Nvidia's $100 billion investment in OpenAI signals a major transformation

Su said that the structure of the deal will allow for AMD "to be incredibly aligned" with OpenAI on strategic objectives, and that it is a "clear validation of our technology roadmap."

Su told "Squawk on the Street" that she sees a 10-year growth path for AI, which requires a lot of computing.

"You need partnerships like this that really bring the ecosystem together to ensure that ... we can really get the best technologies ... out there," Su said, according to CNBC.

In addition to OpenAI, Su said on the company's call that it has "a significant number of MI450 and Helios engagements" in the works with other major customers.

While OpenAI also has a deal with Nvidia, Su said she wants OpenAI to feel aligned with AMD's success as well.

"The more OpenAI deploys, the more revenue we get, and they get to share in part of the upside," Su said. "The important piece of it is it is all performance-based in the sense that the upside is aligned when we get more revenue, when there are more deployments."

Wedbush analyst Dan Ives said the deal "is yet another validation sign that the AI arms race is heating up among Big Tech firms," noting that the tech industry is currently reminiscent of the 1996 acceleration in the dot-com era.

OpenAI's 10% stake in the chip maker "quickly brings" it "right into the core of the AI-chip spending cycle" and also represents "a huge vote of confidence," Ives said in a Monday note. "Any lingering fears around AMD should now be thrown out the window as this gives them a major platform to monetize the AI revolution."

In Wedbush's view, "the AI revolution" is entering the next growth stage, as evidenced by billions of dollars in capital expenditures from major tech firms. At the same time, enterprises are finding more use cases for AI, which Ives said is making "AI winners" in the tech industry.

"The evolution of AI spend is now spreading beyond Big Tech to governments, enterprises, energy capacity and overall infrastructure buildouts around the globe, and we still believe we are in the early innings of this spending cycle," Ives said.

Mizuho analysts led by Vijay Rakesh said that the agreement offers "strong near-term support" of AMD's roadmap for its Instinct series of accelerators - but added that, in their view, Nvidia "remains the leader."

The Mizuho team sees possible challenges around the time the MI450 series is rolled out, they wrote in a Monday note, including with "associated funding." They believe that OpenAI has raised about $47 billion so far this year "combined from private placement," and noted the investment from Nvidia.

Capacity at Taiwan Semiconductor Manufacturing Company Ltd. (TSM) (TW:2330), which manufactures most of the world's advanced chips, could also be strained toward the end of next year from the ramp of Nvidia's Rubin platform and an increase in demand for application-specific integrated circuits through Broadcom Inc. (AVGO), the Mizuho analysts said.

However, Rakesh sees the move as positive for memory and storage stocks, as well as some AI-infrastructure players - including Micron Technology Inc. (MU), SanDisk Corp. (SNDK), Seagate Technology Holdings PLC (STX), Lam Research Corp. (LRCX) and Credo Technology Group Holding Ltd. (CRDO).

The partnership with AMD shows "that OpenAI recognizes a need to diversify its processor supplies as it continues to expand its data centers," Jack Gold, president of J.Gold Associates, said in comments shared with MarketWatch.

Gold added that he expects other major AI firms to deploy AMD's chips into data centers, and that the deal "is a huge win" for AMD as it aims to compete more closely with Nvidia.

-Britney Nguyen

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10-06-25 1637ET