AMD's deal with OpenAI could be transformative.Advanced Micro Devices' (AMD -7.78%) stock soared earlier this week after the company announced a new partnership with OpenAI that could greatly improve its fortunes in the artificial intelligence (AI) chip market. As part of the deal, OpenAI will deploy 6 gigawatts of AMD's Instinct graphics processing units (GPUs) across multiple generations of hardware, beginning with a 1 gigawatt rollout of its MI450 chip in the second half of 2026. Meanwhile, AMD granted O ...

Core Insights - Advanced Micro Devices (AMD) experienced a significant stock price increase of over 23%, closing at $203.71, which added more than $60 billion to its market capitalization following a strategic partnership announcement with OpenAI [1][2] - The partnership involves OpenAI deploying up to 6 gigawatts of AMD GPU computing power, indicating a substantial infrastructure commitment for AI model training and operation [2] - AMD's projected revenue from this deal is expected to reach tens of billions of dollars, with a significant boost to non-GAAP earnings per share [2] Partnership Details - The agreement includes a warrant allowing OpenAI to acquire up to 160 million AMD shares, aligning OpenAI's financial interests with AMD's success [3] - The initial deployment will utilize AMD's next-generation Instinct MI450 Series GPUs, with deliveries starting in the second half of 2026, showcasing confidence in AMD's future technology [2] Financial Performance - AMD reported a 69% year-over-year revenue increase in its Client and Gaming segment, driven by record sales of Zen 5 Ryzen processors [4] - The company has achieved 33 consecutive quarters of server market share gains with its EPYC processors, leading to a record $1.2 billion in free cash flow in the second quarter [5] Market Positioning - The partnership with OpenAI positions AMD as a key player in the AI market, providing validation for its ROCm software and establishing it as a competitive alternative to NVIDIA [6][7] - This agreement shifts the market dynamic from a near-monopoly to a competitive duopoly, creating new opportunities for AMD with other large enterprises [7] Analyst Reactions - Following the announcement, analysts rapidly upgraded their forecasts for AMD, with price targets significantly increased by firms such as Barclays and Jefferies to $300 [8][9] - AMD's market capitalization has surpassed $330 billion, reflecting a recalibrated potential for long-term earnings growth supported by the new partnership [10] Strategic Implications - The OpenAI partnership is seen as a transformational event that validates AMD's technology and secures a massive revenue stream, marking a shift in the investment thesis for the company [11] - The focus has shifted from whether AMD can compete in the AI space to how effectively it will execute on this opportunity, positioning AMD as a co-leader in the new era of computing [12]

OpenAI launched a multibillion-dollar partnership with chip designer Advanced Micro Devices (AMD).By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions .Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.The collaboration will see the companies develop artificial intellig ...