AMD Stock Is Soaring on an OpenAI Deal, But Analysts Still Think It Can Climb 35% From Here

Core Insights - AMD stock surged nearly 24% following the announcement of a partnership with OpenAI, which may grant OpenAI a 10% stake in AMD [1] - The partnership involves the deployment of six gigawatts of AMD's Instinct GPUs over several years, starting with a 1-gigawatt rollout in late 2026 [1][2] - AMD issued OpenAI a warrant for up to 160 million shares, with vesting conditions based on deployment volume and AMD's stock performance [2] AMD's Strategic Positioning - The agreement positions AMD as a core strategic partner to OpenAI, marking one of the largest GPU deployment deals in the AI industry [2] - OpenAI President Greg Brockman highlighted the partnership's significance due to the current lack of computing power for revenue-generating ChatGPT features [4] - CEO Lisa Su emphasized that AI is on a 10-year growth trajectory, necessitating foundational partnerships to bring advanced technologies to market [4] Financial Implications - The partnership is expected to generate tens of billions in revenue for AMD and be highly accretive to earnings per share [5] - AMD reported $7.7 billion in second-quarter revenue, reflecting a 32% year-over-year increase, with strong momentum continuing into the third quarter [6] - The data center business achieved $3.2 billion in revenue in the second quarter, despite challenges in selling MI308 chips to China [7] Market Dynamics - The AMD partnership helps diversify OpenAI's supply chain, reducing dependence on a single vendor, particularly after OpenAI's recent $100 billion agreement with Nvidia [5][4] - Nvidia's stock dipped 1% following the news of the AMD partnership, indicating potential shifts in market dynamics [5]