Transformational deal reframes AMD’s AI positioning
The dramatic more-than 25% leap in Advanced Micro Devices’ (AMD) share price in pre-market trading today – up around 37% at the official open – can largely be traced to a breakout announcement that reframes its role in the accelerating AI infrastructure race. Early this morning, AMD revealed that it has secured a significant, multi-year supply deal with OpenAI.
Under this agreement, AMD will deliver AI chips and provide an option for OpenAI to take up to a 10% stake via warrants, creating a strategic alignment beyond a typical supplier-customer relationship.
The core of the agreement involves OpenAI deploying AMD’s upcoming Instinct MI450 graphics processing units (GPUs) across a roadmap that would scale to about six gigawatts of processing power, beginning with a one-gigawatt deployment in the second half of 2026.
The deal is being framed not as a one-off order but as a foundational partnership with the potential to generate “tens of billions” in revenue over time.
Warrant structure aligns long-term interests
Crucially, the warrant structure gives OpenAI the right (subject to milestones) to acquire up to 160 million shares of AMD – roughly 10% of the float – at extremely favourable terms, which could further align their incentives as the agreement is executed.
This innovative financial structure creates a deeper partnership than traditional supply agreements, with OpenAI’s potential equity stake providing strong incentives for successful execution.
The milestone-based nature of the warrants ensures that AMD must deliver on its promises before OpenAI exercises its right to acquire the substantial equity position.
This alignment of interests through equity participation represents a new model for chip supplier relationships in the AI infrastructure space.
Market validation of AI strategy
Investor reaction to the news was explosive. The market is treating the deal as a validation of AMD’s AI ambitions and a signal that it may close the gap with dominant players like Nvidia in the race for compute infrastructure.
The promise of structural, recurring revenue from AI and expanded influence over the AI stack shifts AMD’s positioning from a chip supplier to a strategic partner in AI network builds.
This transformation in market perception reflects growing confidence that AMD can compete effectively in the highest-value segments of AI infrastructure rather than being relegated to secondary positions.
The stock’s dramatic surge demonstrates how significant strategic partnerships can rapidly alter investor sentiment and valuation frameworks.
Building momentum preceded announcement
But it’s not just the headlines. Underlying momentum had already been building among analysts who increasingly discount AMD’s ability to capture more share in data centre GPUs, especially as demand for inferencing (rather than just model training) grows.
Some forecasts had already begun projecting more aggressive growth from AMD’s AI platform business, making today’s announcement feel like a breakthrough rather than a bolt from the blue.
Moreover, the broader macro and sector sentiment is favourable. AI and chip stocks have been rallying ahead of regulatory clarity, and recent gains in semiconductors have fed momentum into individual names like AMD.
The federal government shutdown concerns and nervousness elsewhere have also driven flows toward high-conviction growth stories, adding fuel to the rally.
Execution risks temper enthusiasm
Of course, some caution is warranted. The deal with OpenAI hinges on execution and meeting ambitious milestones that span multiple years and require significant technological and operational achievements.
The warrants are contingent on AMD achieving certain deployment, pricing, and share price targets, creating performance hurdles that must be cleared.
The growth periods span into 2026 and beyond, so this is as much a bet on future execution as it is on present strength and current capabilities.
And while the market is bidding up the stock today, much of the optimism is now priced in – any missteps, revenue delays, or cost overruns could invite sharp reversals.
AMD analyst rating and technical analysis
Even before today’s announcement, TipRanks had a Smart Score of ‘9 Outperform’ with a ‘buy’ rating for AMD.