Wall Street analysts explain how AMD’s own actions will pay the billions of OPENAI fleas purchases

After AMD and Openai announced on Monday an enlarged partnership, discussions immediately turned to the unusual way in which Openai would pay for its AMD purchases. To do this, it will use the own AMD stocks.

To summarize: Openai has agreed to help AMD refine its range of competing chips NVIDIA, Instinct GPUs, as well as to buy and deploy 6 gigawatts of calculation capacity from AMD over several years. AMD said this agreement reported billions of income.

But Openai does not finance this with his own income. Instead, AMD has granted OPENAI a series of shares subscription vouchers – up to 160 million AMD shares – which will be acquired by tranches as certain stages are reached. These steps include specific increases in the share price, the last tranche dependent on AMD shares reaching $ 600 million each, AMD revealed. They were negotiated at around $ 165 before the news was announced and climbed $ 214 at the closing of the market on Monday after the announcement.

If the course of the action reaches its objectives and that Optai achieves all of its required contributions and that Optai holds all AMD actions, without selling any in the way, Openai could earn enough AMD shares to pay a lot of GPUs. The title could be worth around $ 100 billion.

“We note that the last 6th tranche requires a market capitalization of approximately $ 1 billion to be acquired – therefore, if OAI should keep shares until the end of the transaction, its participation would be worth around 100 billion dollars,” writes UBS Timothy Arcuri analyst in a research note on Tuesday.

But Arcuri believes that a more likely scenario would be that Optai sends his AMD shares along the way to pay for his AMD invoice. It is therefore essentially a program allowing AMD to finance the purchases of this customer.

Nevertheless, affirms Arcuri, the validation according to which the GPUs of AMD can manage the workloads OpenAi, and therefore any other workload IA, is sufficiently precious for AMD to launch this financing bet. “AMD underlined the current dialogues with customers beyond Openai and expects that this agreement to accelerate the adoption of AMD in the long term,” he wrote. In particular, the OPENAI approval seal allows it to sell its GPUs to the many cloud service providers which it already provides in processors.

Thus, in the long term, those who will really pay for the giant multi -year purchase of GPU AMD by OPENAI will be private and intuitive investors if they actually raise the course of action.

In many ways, NVIDIA also finances purchases of NVIDIA products by OPENAI with its own investment of $ 100 billion announced last month. The difference, of course, is that the multiple investments of Nvidia in Openai have enabled Nvidia to obtain participation in the fast -growing AI supplier, not the other way around.

But what choice had AMD? By financially designing an agreement that costs OPENAI little, it takes a significant place-up to 30 % market share, according to USB estimates-in one of the largest constructions of new generation data centers that the world has ever known.

Even if Arcuri admits that the AMD agreement is “undoubtedly less attractive” than that of Nvidia, “we consider this as a major validation of its roadmap (D’AMD) which could make snowball with other customers”.