In premarket trade on Monday, shares of Advanced Micro Devices (AMD) gained over 30% before settling up by 23.71% on the day. The stock jumped after the chip firm announced a supply deal with OpenAI.
The deal, which involves OpenAI investing in AMD through warrants, has several risks that investors should consider.
OpenAI will deploy AMD-powered AI servers that output six gigawatts of GPU. The deployment is over several years and contains a multi-generation agreement. The deployment is in phases.
OpenAI will deploy the first one gigawatt of AMD’s MI450 GPUs in the second half of 2026. Anything may happen between now and next year. The AI valuation bubble may shrink, demand for AI servers might fall, and regulations might change. The competitive landscape may change drastically in that time.
Currently, Nvidia (NVDA) has a commanding market share in the AI server and desktop GPU market. In the PC gaming market, AMD is very far behind despite a successful launch of its 9000 series GPUs. Nvidia has too strong a moat in offering frame generation that AMD’s FSR technology cannot catch up to.
In the AI server market, data scientists and AI developers want Nvidia’s proprietary CUDA. They are unlikely to experiment with AMD’s open source AI solution.
To hedge the risks of an Nvidia GPU shortage, OpenAI wants an AMD option.
Nvidia announced an up to $100 billion investment in OpenAI. CEO Jensen Huang may not like OpenAI’s decision to invest those funds in its competitor, AMD.
