A significant development has emerged in the AI hardware sector. On the evening of February 24, during pre-market trading, shares of Advanced Micro Devices surged dramatically, rising over 10% at the time of reporting.
The catalyst for the move is a new, massive chip agreement between Meta, the parent company of Facebook and Instagram, and Advanced Micro Devices. This comes just one week after Meta committed to using millions of NVIDIA processors for its AI expansion.
Meta stated that this multi-year agreement with Advanced Micro Devices involves deploying up to 6 gigawatts of GPU capacity in AI data centers and includes the use of AI-optimized CPUs. The first shipments of AMD's Helios rack-scale servers, equipped with MI450 GPUs, are scheduled to begin later this year.
AMD CEO Lisa Su commented in a statement that the company is providing "high-performance, energy-efficient infrastructure optimized for Meta's workloads, accelerating one of the industry's largest AI deployments and positioning AMD at the heart of global AI infrastructure development."
In its recent earnings report, Meta pledged capital expenditures of up to $135 billion this year, aiming to keep pace with large peers and companies like OpenAI and Anthropic in the global AI race. Overall, Meta plans to construct 30 data centers, with 26 located in the United States.
This latest partnership is a critical advancement for Advanced Micro Devices, which currently trails far behind NVIDIA in the AI chip market. NVIDIA, now the world's most valuable publicly traded company by market capitalization, controls approximately 90% of the market.
Chip analyst Ben Bajarin noted, "Meta is in a unique position to control the full stack; they can utilize whatever computing power they desire. This deal further confirms the reality of compute constraints, and the transaction will be comprehensive."
While specific financial terms of the agreement were not disclosed, Bajarin, who was briefed on the deal, estimates its value could reach tens of billions of dollars over at least four years, as "deploying 6 gigawatts will take a considerable amount of time."
This follows a similar agreement between OpenAI and Advanced Micro Devices in October of last year, signaling AMD's emergence as a viable "second choice" for AI giants and large-scale cloud computing providers.
Under the terms of the agreement, Meta will purchase sufficient quantities of AMD's latest MI450 series chips to provide up to 6 GW of computing capacity for its data centers over the next five years. AMD indicated that each gigawatt of capacity is expected to generate billions of dollars in revenue for the company. Meta anticipates deploying the first 1 GW of capacity later this year.
As part of the deal, AMD has agreed to grant Meta warrants, allowing it to purchase up to 160 million shares of AMD stock at $0.01 per share, representing approximately 10% of the company, contingent upon achieving certain milestones.
The full stock award is dependent on the appreciation of AMD's share price. Meta will only receive the final tranche of shares if AMD's stock price reaches $600.
Meta is already AMD's second-largest customer, and this partnership is set to become even more critical for the chipmaker's growth. According to Wall Street projections, AMD reported sales of $34.6 billion last year and is expected to achieve 34% revenue growth this year. An additional $10 billion in sales would significantly accelerate its efforts to catch up with NVIDIA.
Comments