AMD Clinches Second Mega Chip Supply Deal, this Time With Meta
Advanced Micro Devices announced a significant agreement to supply Meta Platforms with artificial intelligence chips valued at up to $60 billion over a span of five years. This arrangement will enable the owner of Facebook to potentially acquire a stake of up to 10 percent in the semiconductor company.
AMD's stocks experienced a notable increase of over 10 percent during premarket trading, following a closing price of $196.60 in the prior session.
The company entered into a comparable agreement with OpenAI the previous year, which was viewed as an endorsement of its chips and software, leading to a substantial increase in its stock value.
In recent times, there has been a notable increase in the number of contracts for chip supply, indicating a significant demand for processors within the AI sector. Meta has also entered into an agreement with Nvidia, a leading competitor of AMD, to purchase a substantial quantity of AI chips.
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The collaboration highlights the strengthening relationships between leading companies in the AI sector in the midst of growing apprehensions about circular transactions. Meta and OpenAI are poised to acquire a share in a prominent supplier, while at the same time, competitor chipmaker Nvidia is considering investments in some of its key clients, such as the parent company of ChatGPT.
During a press conference, AMD CEO Lisa Su announced that the company will be providing Meta with a total of six gigawatts' worth of chips, with the initial delivery consisting of one gigawatt for Meta's upcoming MI450 flagship hardware, scheduled for release in the latter part of the current year.
Investor concerns regarding the AI market are compounded by the prolonged anticipation for substantial returns on investment resulting from the continuous and substantial expenditures by leading technology companies to enhance their data center infrastructure.
Alphabet, Microsoft, Amazon.com, and Meta are anticipated to invest a collective sum of $630 billion this year, per Reuters estimates, with a primary concentration on the development of data centers and artificial intelligence chips. Meta plans to purchase central processors in addition to AMD's leading graphics chips, with one variation being tailored to meet the specific requirements of the social media platform.
Su mentioned that the customized CPU will be optimized to provide robust performance while maintaining low energy consumption. The agreement will encompass two iterations of AMD's central processing units.
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Meta provided assistance in the development of the MI450 design, specifically tailored for the process of inference in computing. This process involves the operation of chatbots like OpenAI's ChatGPT in generating responses to user inquiries.
According to experts in the field, the demand for inference hardware is projected to significantly surpass the market size of the equipment necessary for constructing the complex AI models. AMD will grant a warrant for 160 million shares at a strike price of one cent as specified in the contract.
The warrant will be gradually earned throughout the duration of the agreement, conditional on AMD's stock price meeting increasing performance goals, potentially reaching $600. Alongside the stock price milestones, Meta must also satisfy specific "technical and commercial considerations" for each portion of the warrant.