Wall Street analysts explain how AMD’s own stock will pay for OpenAI’s billions in chip purchases

Core Insights - OpenAI has expanded its partnership with AMD, agreeing to help refine AMD's Instinct GPUs and to purchase 6 gigawatts of compute capacity over multiple years, with the deal valued in billions [1] - OpenAI will pay for these AMD purchases using stock warrants, up to 160 million shares, which will vest based on specific milestones, including stock price increases [2] - If AMD's stock reaches certain targets, OpenAI's stake could be worth approximately $100 billion, contingent on holding the shares without selling [3] Financial Mechanism - The payment structure allows OpenAI to finance its GPU purchases through AMD's stock, suggesting a unique financing arrangement [4] - Analyst Timothy Arcuri notes that while OpenAI may sell AMD stock to cover costs, the validation of AMD's AI GPUs for OpenAI workloads is significant for AMD's market position [5] Market Implications - The partnership is expected to enhance AMD's adoption momentum in the AI sector, particularly among cloud service providers [5] - The broader market impact may see retail and institutional investors effectively financing OpenAI's GPU purchases through stock price increases [6] - In contrast, Nvidia's investments in OpenAI have resulted in Nvidia gaining a stake in OpenAI, highlighting different strategic approaches between the two companies [6]