Advanced Micro Devices (AMD) has just landed one of the most transformative deals in its history which is a multi-year agreement to supply artificial intelligence chips to OpenAI. The pact, announced in early October 2025, marks a seismic shift in the competitive landscape of AI hardware, positioning AMD as a formidable challenger to Nvidia’s long-standing dominance. The deal will see OpenAI deploy six gigawatts of AMD’s graphics processing units (GPUs) over several years, beginning with the MI450 series in the second half of 2026. This deployment is equivalent to powering millions of U.S. households and underscores the scale of infrastructure OpenAI is building to support its next-generation AI models.
What makes this deal even more remarkable is its financial and strategic depth. AMD expects to generate tens of billions of dollars annually from the agreement, with projections suggesting more than $100 billion in new revenue over four years from OpenAI and other customers. As part of the arrangement, AMD issued a warrant allowing OpenAI to purchase up to 160 million shares, roughly 10% of AMD’s outstanding stock for just one cent each. These shares will vest in tranches tied to deployment milestones and escalating stock price targets, culminating in a final tranche that unlocks only if AMD’s share price hits $600.
The market reaction was swift and euphoric. AMD shares surged more than 34% on the day of the announcement, marking their biggest single-day gain in over nine years. The rally added approximately $80 billion to AMD’s market capitalization, catapulting its valuation to over $330 billion and surpassing household names like Coca-Cola and General Electric. Investors interpreted the deal as a powerful vote of confidence in AMD’s AI capabilities, validating years of investment in its Instinct GPU lineup and software ecosystem. While AMD remains a distant second to Nvidia in terms of AI chip market share, this partnership with OpenAI signals a new era of competition and diversification in the AI hardware space.
OpenAI’s motivations are equally strategic. With a valuation of $500 billion and ambitions to spend “trillions” on AI infrastructure, the startup is racing to secure the compute power needed to scale its models globally. The AMD deal provides a robust alternative to Nvidia’s systems, which OpenAI also plans to deploy in parallel. By diversifying its supplier base, OpenAI reduces its dependency on any single chipmaker and gains leverage in negotiating future infrastructure commitments.
In the broader context, this deal reflects the voracious appetite for AI compute and the growing importance of hardware partnerships in shaping the future of artificial intelligence. For AMD, it is not just a revenue windfall, it is a validation of its technology, a boost to its competitive standing, and a catalyst for long-term growth. For OpenAI, it is a strategic manoeuvre to secure the resources needed to fulfil its mission. And for the market, it is a clear signal that the AI arms race is accelerating, with massive implications for investors, developers, and the tech ecosystem at large.
At this point of writing, AMD makes up 3% of my US stock growth portfolio.