Why AMD Stock Is Soaring This Week

Core Insights - Advanced Micro Devices (AMD) shares have surged 42% this week following a significant chip-supply agreement with OpenAI [1][4] Group 1: Partnership Details - OpenAI and AMD announced a partnership on October 6, involving a five-year deal for AMD AI accelerator cards that will consume 6 gigawatts of electric power [2] - The first gigawatt will utilize AMD Instinct MI450 GPUs, expected to be operational in the second half of 2026 [2] - OpenAI has previously used AMD's MI300X and MI350X accelerators, indicating a diversified hardware strategy beyond Nvidia [3] Group 2: Financial Implications - AMD anticipates "double-digit billions" in annual sales from this agreement, potentially leading to over $100 billion in unexpected AI revenue over the next five years [6] - For context, AMD's total revenue over the last four quarters was reported at $29.6 billion, significantly lower than Nvidia's $165.2 billion during the same period [7] Group 3: Stock Options and Market Reaction - As part of the deal, OpenAI has the option to purchase nearly 10% of AMD's stock, contingent on stock price and order volumes, with the final tranche unlocked at a stock price of $600 [3] - Following the announcement, AMD's stock closed 26% higher and continued to rise as the market reacted to the news [4]