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AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

reuters.com

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Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#101

Post by Havoc »

alberth wrote: post #78

The 10% option is interesting. As a comparison of stocks over the last 5-years: 1-Year 5-Year Market Cap (Today) ------ ------ --------- AMD 20% 150% $0.35T NVIDIA 50% 1,250% $4.5T Today, AMD is up ~30% (which wipes the past year stock slump). So a healthy portion of AMD overall 5-years gain are just from this announcement today. And OpenAI ($0.50T) is currently valued more than AMD ($0.35T) itself. https://finance.y…

Finally. AMD had recently been pretty stagnant which made little sense given their dominance on CPU and vaguely competitive GPUs (cuda notwithstanding)

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#102

Post by DebtDeflation »

alberth wrote: post #9
didntknowyou wrote: post #4

they're just printing money for each other at this point

Some refer to it as "circular financing". It's "seller financing" but to a degree we've never seen before in an industry (which create these "circular" effects). There's a good HN thread from 2-days ago on this subject (200+ comments). https://news.ycombinator.com/item?id=45473033

Oh, we saw it before. 1998-2000. Cisco, Sun, et al, "investing" in the dotcoms so those dotcoms could turn around and use the funds to buy servers and routers from them.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#103

Post by tanh »

jcranmer wrote: post #95
tanh wrote: post #69

I don't know why Bloomberg TV are asking where this money comes from for OpenAI. It comes from the AMD stock holders. If the AMD stock pumps then OpenAI gets free money to buy more, without giving up equity. If it doesn't then OpenAI just walk away.

OpenAI is supposed to be buying something like $100 billion of chips from AMD. On top of the hundreds of billions to like five other companies for AI chips and other compute. Where do those several hundred billions come from? That's the question being asked here.

Just the 1st tranche of shares would be like $6 billion at $220 so if they borrow against that they can fund it. If the hype continues they keep it going

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#104

Post by AlanYx »

jcranmer wrote: post #95
tanh wrote: post #69

I don't know why Bloomberg TV are asking where this money comes from for OpenAI. It comes from the AMD stock holders. If the AMD stock pumps then OpenAI gets free money to buy more, without giving up equity. If it doesn't then OpenAI just walk away.

OpenAI is supposed to be buying something like $100 billion of chips from AMD. On top of the hundreds of billions to like five other companies for AI chips and other compute. Where do those several hundred billions come from? That's the question being asked here.

Not all of the $100 billion are purchases by OpenAI ("AMD expects to receive more than $100 billion in new revenue over four years from OpenAI and other customers").

For some reason the OpenAI portion of this deal is quoted in gigawatts rather than number of MI450s purchased, which makes it hard to tell how much of that $100 billion is from OpenAI. It's probably around $80 billion.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#105

Post by SecretDreams »

Jlagreen wrote: post #85
SecretDreams wrote: post #51

This industry is the most intense game of musical chairs I've seen in a long time.

And you have that right. And now imagine what will happen when OpenAI makes deals with Nvidia and AMD. Do you think Hyperscalers will just watch? I expect Musk to make a $1 trillion deal soon. I guess, that's why he wants to get the $1 trillion from Tesla. And do you think Meta, Amazon, Microsoft and Google will stand by while Altman and Musk are buying future supply from Nvidia and AMD? I love that. As an investor i…

Trading any of this, the only question that you need to answer is:

What is more painful to you, missing some gains on the way up or holding positions that have flipped from positive to negative very rapidly?

Markets like this, the moves will be violent in both directions, not just on the way up.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#106

Post by nerdix »

dist-epoch wrote: post #86
nerdix wrote: post #10

The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around. In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share. I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the…

> I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity. Yes, you are reading it wrong. The big winner here is AMD, not OpenAI. If there is any signal here, it's that AMD is still in the AI game. AMD stock is up 30% on this news.

I didn't mean to imply that there was a winner or loser. Just that AMD was subsidizing it's GPUs with equity.

I think there are logical reasons for both companies to agree to this deal. AMD is trying to break CUDA dominance. OpenAI is getting extremely cheap compute for expansion and they'd also benefit from the Nvidia monopoly falling if that ever happens.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#107

Post by f4uCL9dNSnQm »

tbrownaw wrote: post #59
andrewstuart wrote: post #17

It’s quite a good strategy to counteract the prevailing sense that “No one ever got fired for buying Nvidia GPUs”. AMD just doesn’t know how to compete with Nvidia. The best it can do is charge 10% less and release GPUs about the same level of underwhelming performance as Nvidia. Maybe they wouldn’t need to sell equity if they made better faster cheaper products than Nvidia. But Lisa Su can’t bring herself to compete…

> and release GPUs about the same level of underwhelming performance as Nvidia. What's the standard that they're underwhelming relative to? I thought Nvidia was the current big fish there.

NVidia is terrible value for consumers when comparing their own offering from previous years. The graph from https://gamersnexus.net/gpus/great-nvidia-switcheroo-gpu-shr... shows how low/mid segments become weaker and weaker with each generation.

Meanwhile AMD doesn't try to disturb the market, they keep their pricing at "price of similar NVidia card - $50". They aren't going to gain market share that way.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#108

Post by Havoc »

ralfn wrote: post #80
nerdix wrote: post #10

The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around. In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share. I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the…

Because of the vesting milestones the stock price of AMD would go up by such an extent that creating more s hares would not dilute the share price. Obviously, for the stock price to go up money needs to come from somewhere. It makes sense that this deal would lower the NVidia stock price, so technically it will be NVidia investors waiting too long to respond to this news that will be paying for this. A tax on the mis…

> Obviously, for the stock price to go up money needs to come from somewhere.

Not convinced that’s true anymore in current climate. Bigger numbers announcements and AI Pixie dust works too apparently lol

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#109

Post by koakuma-chan »

alberth wrote: post #78

The 10% option is interesting. As a comparison of stocks over the last 5-years: 1-Year 5-Year Market Cap (Today) ------ ------ --------- AMD 20% 150% $0.35T NVIDIA 50% 1,250% $4.5T Today, AMD is up ~30% (which wipes the past year stock slump). So a healthy portion of AMD overall 5-years gain are just from this announcement today. And OpenAI ($0.50T) is currently valued more than AMD ($0.35T) itself. https://finance.y…

How is OpenAI valued? It's not publicly traded.

Re: AMD signs AI chip-supply deal with OpenAI, gives it option to take a 10% stake

#110

Post by dsr_ »

vel0city wrote: post #91
kaptainscarlet wrote: post #42

Earlier quoted context omitted.

Compute resources.

And high end networking gear will always have a buyer, right Nortel?

Lucent agrees: even used, the product will retain 90% of list price because the market has an infinite number of VC-backed buyers.
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