AMD clinches second mega chip supply deal, this time with Meta

By Max A. Cherney and Stephen Nellis

SAN FRANCISCO, Feb 24 (Reuters) - Advanced Micro Devices AMD.O said on Tuesday it has agreed to sell up to $60 billion worth of artificial intelligence chips to Meta Platforms META.O over five years in a deal that allows the Facebook owner to purchase as much as 10% of the chip firm.

AMD signed a similar pact with OpenAI last year, which was hailed as a vote of confidence in its chips and software, significantly boosting its stock price.

A recent slew of chip supply agreements underscores ravenous appetite for processors from the AI industry. Meta has separately struck a deal with AMD's larger rival Nvidia NVDA.O to buy millions of AI chips.

AMD will supply six gigawatts' worth of chips to Meta, starting with one gigawatt of the company's forthcoming MI450 flagship hardware in the second half of this year, AMD CEO Lisa Su told a news briefing.

In addition to the AMD's flagship graphics chips (GPUs), Meta also plans to buy central processors (CPUs), including a variant that will be customized for the social media platform's needs.

The custom CPU will be tuned to deliver powerful performance while keeping energy consumption as low as possible, Su said. The deal will include two generations of AMD's CPUs.

"So no question Mark is very, very ambitious in what he wants to accomplish, and we want to use every aspect of our technology to really help Meta to accomplish that," Su said, referring to Meta CEO Mark Zuckerberg.

Meta helped contribute to the MI450 design that is optimized for a computing process known as inference, which is when a chatbot such as OpenAI's ChatGPT responds to a user's queries.

Industry analysts expect the market for inference hardware to dwarf the size of the market for the equipment needed to build the large models AI runs from.

As part of the agreement, AMD will issue a warrant for 160 million shares with an exercise price of one cent.

The warrant will vest over the course of the deal and will do so after AMD stock price hits rising performance targets up to $600. In addition to the stock price targets, there are "technical and commercial considerations" for each tranche of the warrant that Meta needs to fulfill.

"Meta is making a big bet on AMD," Su said.

Shares of AMD closed at $196.60 in Monday trading.

Meta plans to continue to buy chips from other vendors and develop its in-house processors at the same time, Santosh Janardhan, Meta's infrastructure head said in the call with reporters. Meta has been in discussions with Google about using the company's tensor processors (TPUs) for AI work, sources have said.

The scale at which Meta is building data centers and infrastructure requires multiple chip vendors and approaches, Janardhan said.

"All of the chip makers end up having sort of a seat at the table," Janardhan added.

(Reporting by Stephen Nellis and Max A. Cherney in San Francisco; Editing by Edwina Gibbs)

((max.cherney@thomsonreuters.com))