AMD shares jump 24% after news of massive chip deal with OpenAI

Advanced Micro Devices (AMD) landed a blockbuster deal with ChatGPT maker OpenAI to build artificial intelligence (AI) infrastructure, giving the chipmaker a chance to show it can mount a challenge to Nvidia in the AI computing industry.

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AMD shares soared 24 per cent to US$203.71 after the agreement was announced on Oct 6, adding US$63.4 billion to the company's market valuation. It is now worth US$330.6 billion (S$427 billion), more than Coca-Cola, General Electric or Chevron.

The news also sent the Nasdaq and the S&P 500 to record closing highs on Oct 6, even as the US government shutdown extended through its sixth day.

OpenAI will deploy 6 gigawatts' worth of AMD graphics processing units over multiple years, according to the pact, which is just over half the size of a recent deal OpenAI reached with Nvidia. It also sets the stage for the AI startup to acquire a large stake in AMD.

The deal represents a high-stakes test for AMD - one that could deliver tens of billions of dollars in new revenue and burnish its status as a serious contender in AI technology. There are also risks: It further ties AMD's prosperity to an AI market that some worry is in a bubble.

"This is certainly the largest deployment we have announced so far," AMD chief executive officer Lisa Su told Bloomberg Television.

As part of the accord, OpenAI will have the ability to buy as many as 160 million shares of AMD at one US cent apiece, depending on the project hitting certain milestones. This is about 10 per cent of the chipmaker's outstanding stock.

The targets require AMD's share price to continue to increase in value. At the final level of the agreement, the stock would have to reach a price of US$600.