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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

#111

Post by Pet_Ant »

AlanYx wrote: post #68
yousif_123123 wrote: post #39

Earlier quoted context omitted.

I think at least part of the 10% is if AMD stock reaches 600. Not that I disagree that this looks weird. Why was that needed to be offered? Couldn't they just buy the AMD chips if they're good enough? Or Nvidia is it's better? I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?

>Couldn't they just buy the AMD chips if they're good enough? OpenAI would presumably need to raise money to buy the AMD chips. The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI. Then OpenAI will presumably turn around and sell those shares (or borrow against them) to raise enough money to purchase the AMD GPUs.

It seems to me that there is an aspect of marketing to this deal. Nvidia has the mindshare, so this would help legitimise AMD offerings. This is almost product placement/sponsorship for AMD.

Also, this would battle test AMD's platform and provide enhancements so it's also a beta-testing service.

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

#112

Post by SecretDreams »

lelanthran wrote: post #70
cs702 wrote: post #55

OpenAI now has an option to buy 10% of AMD for $0.01 per share, subject to certain milestones. Basically, AMD is giving up equity to buy its way into the AI market. It's fantastic news , because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips. We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.

It's only fantastic news if there is no bubble. If there is a bubble, AMD just gave away $160m for nothing in return.

> AMD just gave away $160m for nothing in return.

Where'd you get this number? The equity is worth closer to 34bil if fully realized?

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

#113

Post by alberth »

koakuma-chan wrote: post #109
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.

Sale of shares on secondary market at that valuation.

https://www.reuters.com/technology/openai-hits-500-billion-v...

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

#114

Post by hmm37 »

lelanthran wrote: post #70
cs702 wrote: post #55

OpenAI now has an option to buy 10% of AMD for $0.01 per share, subject to certain milestones. Basically, AMD is giving up equity to buy its way into the AI market. It's fantastic news , because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips. We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.

It's only fantastic news if there is no bubble. If there is a bubble, AMD just gave away $160m for nothing in return.

No... because the warrants can only be exercised if the share price is at certain points. If AMD goes down, the warrants can't be exercised at all. E.g. we know at least one share price points is when AMD shares are worth $600/share.

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

#115

Post by SecretDreams »

koakuma-chan wrote: post #109
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.

It's valued from secondary markets based on how much it can raise from private investments. These get reported out eventually which juices the hype further in a bit of a vicious cycle. this cycle also has quite the incestuous component too with how every major company seems to have their hands in each other's pants.

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

#116

Post by Havoc »

lelanthran wrote: post #70
cs702 wrote: post #55

OpenAI now has an option to buy 10% of AMD for $0.01 per share, subject to certain milestones. Basically, AMD is giving up equity to buy its way into the AI market. It's fantastic news , because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips. We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.

It's only fantastic news if there is no bubble. If there is a bubble, AMD just gave away $160m for nothing in return.

The option to buy shares seems pretty well locked down with multiple vesting conditions So pretty unlikely that this ends up in a “for nothing” space

https://ir.amd.com/news-events/press-releases/detail/1260/am...

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

#117

Post by SecretDreams »

john-h-k wrote: post #22
theli0nheart wrote: post #8

> As part of the arrangement, AMD issued a warrant that gives OpenAI the ability to buy up to 160 million shares of AMD for 1 cent each over the course of the chips deal. The warrant vests in tranches based on milestones that the two companies have agreed on. This is money printing, just in the private sector. We know what happens when governments do it, and it's not good.

It’s quite specifically not money printing, because it’s backed by something. It could be bad sure but it’s not money printing

> because it’s backed by something

If I finance a car backed by hopes and dreams, I'd be driving real good.

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

#118

Post by rchaud »

dist-epoch wrote: post #90
N70Phone wrote: post #82

Earlier quoted context omitted.

AMD issues new shares and gets a penny (read: effectively zero) back for them. ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI. But all else is not equal. OpenAI only gets the shares if they buy AMD GPUs. The intent is that this offsets the dilution by making AMD overall more valuable. (This is why the stock price jumped on the announcement) It's a GP…

> ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI. But the stock is up 30% on the news. So lose 10%, but gain 30%, so net 20% beneficial to equity holders?

The shares haven't been issued yet, so there isn't any dilution. Equity holders could sell their holdings now and benefit, because when OAI exercises the option and gets 160m shares for peanuts, they will sell those shares ASAP to bring in cash to pay for their orders of AMD chips.

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

#119

Post by hmm37 »

DebtDeflation wrote: post #102
alberth wrote: post #9

Earlier quoted context omitted.

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.

It's the opposite here. It's as if the dotcom is investing into Cisco and Sun, so that it can buy servers and routers from them.

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

#120

Post by lotsofpulp »

theli0nheart wrote: post #92
lotsofpulp wrote: post #60

Earlier quoted context omitted.

It isn’t printing money (money supply was not increased, and no one has access to more money due to the contract signed between the two parties), but I assume it makes the poster feel good to be outraged and express it by writing something like that.

AMD's valuation increased by over 30% this morning, so to say no one has access to more money because of this news is untrue. I'm not outraged at all, I just think this sort of bizarre financial engineering is not a good sign. If the ROI was so obvious, why not, for example, simply issue bonds and buy AMD stock on the open market?

I wrote:

> and no one has access to more money due to the contract signed between the two parties

If a third party decides to pay a higher price for a publicly listed share because of the news of this contract, that is not printing money. The buyer of the shares loses money, the seller gains it, for a net change of zero in money supply.

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