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

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

#351

Post by tim333 »

fancyfredbot wrote: post #260

This $100bn deal didn't cost anything and isn't worth anything. Remember back two weeks ago when Nvidia gave OpenAI $100bn so they can keep buying Nvidia GPUs? This is AMD trying to do the same, but they don't have $100bn so they are offering OpenAI share options to buy GPUs. The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of…

>On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe.

I don't think lending money against stock options would be considered at all safe.

However the deal may work along the lines of:

Investors buy AMD shares, send the price up.

OpenAI uses it's option to buy shares for 1c, sell the to the investors for far more, use the profit to buy AMD GPUs.

So it potentially works very well for OpenAI, ok for AMD and questionably for the investors funding it buy buying AMD shares.

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

#352

Post by tim333 »

cebert wrote: post #327
coliveira wrote: post #288

Earlier quoted context omitted.

It seems that these American companies have decided, with the government blessing, to form a cartel to split the imaginary money they assume will exist for AI technologies. This is an extremely disturbing notion that will only increase the combined power of these tech companies over our daily lives, but may also spell the doom of the economy in a not-so-distant future.

Does anyone here who lived through the dotcom bubble feel like we're in a similar situation with AI? I am excited about AI and recognize its potential. However, the increasing number of business deals like this one is raising my concerns that we may be heading toward a harsh bubble.

It seems to be the general consensus. I'm not sure the investment up until now is that crazy but the proposed deals going forward making huge investments based on iffy financial engineering like this deal seem quite bubbly.

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

#353

Post by tim333 »

throwaway2037 wrote: post #312
HarHarVeryFunny wrote: post #157

Earlier quoted context omitted.

AMD is giving OpenAI warrants (cf options) to buy AMD shares at 1c/share, but these only vest if OpenAI goes thru with AMD purchases as intended. It seems to basically give OpenAI an incentive to go thru with the deal.

Can someone with banking / deal-making experience explain to me how this warrant works? My point: If OpenAI exercises the warrant and buys 10% of AMD for 1 penny per share, where does AMD get the shares? Or will they do a secondary offering and dilute existing shares? Or do they take from treasury holdings (of shares)? Or does AMD coordinate a buyback of shares, then deliver to OpenAI?

They issue new shares. Or effectively already have by issuing the warrants.

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

#354

Post by tim333 »

bwfan123 wrote: post #202
razoorka wrote: post #171

This whole thing looks like a bubble in slow motion. A “non-profit” that somehow buys stakes, signs multi-billion supply deals, and moves markets based on promises of future models — all while technically owning nothing tangible. They’re leveraging their own paper value to buy more paper value. It’s circular finance at scale: every deal increases the perceived valuation, which then becomes collateral for the next one…

What surprises me is the pace and size of these announcements. So many announcements so fast and each one at least 100B all involving openai. Reminds me of a quote by Chuck Prince - Citigroup CEO from 2008 - "As long as the music is playing, you've got to get up and dance"

Reminds me of PGs 2008 essay passage:

>Sam Altman has it. You could parachute him into an island full of cannibals and come back in 5 years and he'd be the king. If you're Sam Altman, you don't have to be profitable to convey to investors that you'll succeed with or without them.

Looks like he's doing well wheeling and dealing us cannibals.

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

#355

Post by tim333 »

Argonaut998 wrote: post #293

When I was around 10 years old I remember us asking the teacher why not just print money to solve the worlds problems and the teacher scoffing. It took me another 15 years to realise that’s basically what central banks do, especially these last five years. BTC is at $125k, gold at $4000, and every other week we are inundated with some multi-hundred billion dollar deals somewhere or other. All this talk about multi GW…

There are consumers but they are getting the stuff for free or close to that. Whether they will ever be monetized enough to pay for it all I don't know.

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

#356

Post by Jlagreen »

didibus wrote: post #299
lucianbr wrote: post #163

Earlier quoted context omitted.

Where is this other $300B coming from? Is OpenAI paying AMD $400B or what? I looked at the article but it seems disjointed and hard to parse for me. And I don't see where it mentions some $400B coming to AMD one way or another. It's implied... how? Sorry, this isn't sarcasm or anything like it. I just don't get it and your answer does not help.

I think the idea is that, OpenAI using AMD GPUs will help AMD become competitive against Nvidia in the AI space. If OpenAI is able to use them for their models, other companies will see AMD as a legitimate option and might switch to AMD for GPUs as well. This would be where AMD is to gain new money. OpenAI also has to gain, if it means access to more GPUs allows it to compete and be the winner of the LLM race. As the…

AMD was desperate enough to sell 10% of their company to get 1 customer.

The issue here is now, that every large customer of AMD will now probably ask for equity. AMD has put itself into a pit hole with that deal.

If I were Hyperscaler CEO, I would basically ask for the a similiar deal as OpenAI or no business. Sorry Lisa Su but as a CEO giving equity to a customer is an absolute red flag because it starts a negative spirale you can't stop.

It seems that no matter the discount, OpenAI wasn't ready to make deal without equity. This tells you exactly how AMD is seen in the AI world.

OpenAI will take the compute for free and help AMD to rise stock value but it won't help AMD one bit because if AMD remains in the current position then OpenAI and Hyperscalers can get great deals with equity from AMD. The incentive isn't now to improve AMD to be competitive but to squeeze everything out of a company being desperate enough to give equity to customers.

And AMD will feel this. Nvidia will remain dominant because of ecosystem and supply. AMD can't easily replace Nvidia in supply chain and Nvidia is already strongly entrenched in many AI compute operations. And on the other side Hyperscalers are focused on their own chips (even OpenAI LOL) so they will tell AMD "Give us equity or no deal". This deal might be really the worst AMD deal yet because AMD is telling the world "here, you can get free AI compute from us financed by our equity". And while it might push AMD share price the very share price will drop 80-90% like any other one in case of an AI bubble pop.

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

#357

Post by Jlagreen »

wqaatwt wrote: post #123
j4hdufd8 wrote: post #94

Earlier quoted context omitted.

> A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't NVIDIA doesn't place transistors in particular configurations. Foundries do that for them. And it is currently common sense that the software is the moat, not the hardware design. Good luck changing the ecosystem to use AMD.

> that the software is the moat, not the hardware design. For inference that’s hardly relevant, though? For training its not exactly insurmountable either.

On huge GPU clusters running inferencing the utilization of GPUs is key.

Imagine you have 1 million GPUs and you have 99% utilization of theoretical performance in the system with inferencing. That would mean 10k of GPUs are basically idle and draw power. You could now try to identify which ones are idle but you won't find them because utilization is a dynamic process so while all GPUs are under load not all are running 100% performance beause of interconnects and networking not providing data fast enough so your whole network becomes a bottleneck.

So what you need is a very smart routing process of computation requirements on the whole cluster. This is pure SW issue and not HW issue. This is the SW Nvidia has been working on for years and where AMD is years behing.

This is also why Jensen is absolutely right to say that competitors can offer their chips for free because Nvidia's key in TCO performance is the idea of one giant GPU so SW and networking allowing for highest utilization of a data center. You can't build a GPU the size of 1 million GPUs so you have to think of the utilization problem of a network of GPUs.

In the real world utilization rates are way below 100% so every % better of utilization is way more worth than the price of single GPUs. The idea here is that the company providing 2-3x higher utilization can easily ask for like 5x higher pricing per chip and will still deliver a better TCO.

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

#358

Post by Jlagreen »

cs702 wrote: post #245
rs186 wrote: post #235

Earlier quoted context omitted.

That argument could apply to every company who build their business on AI (except Nvidia) but we haven't seen any notable initiative or any significant movement in the past 3 years. I would not put my bets on private companies' goodwill. I'd rather believe they'll do whatever is most important for their business priority, understand things at their face value, and then hope for the best.

I disagree. My argument could not apply to other companies, because AMD is the only other maker of GPU hardware that could conceivably compete with Nvidia at scale in the AI market. Intel's GPUs have never been in the same league. New alternatives like Cerebras, etc. are too small, too different, and too unproven at scale. I'm not betting on anyone's goodwill, I'm betting on OpenAI's and AMD's self-interest. Please d…

All Tech companies including OpenAI have initiatives for their own chips. Nobody talks about Intel.

Tech companies have the following options:

1. Buy Nvdia high performance stack with stable and fast support and deploy your SW developers to quickly get started

2. Buy AMD whatever stack and deploy your SW developers to make a lot of ground work

3. Develop and deploy your own chips and use your SW developers to make your SW from scratch but exactly as you need it

The only reason they might go with No. 2 is if AMD gives them the HW more or less for free but maybe even then will mix 2 + 3 if they don't want 1. And AMD deal is showing exactly this, AMD has to give free quity to get a customer for their HW.

What people don't get, who in their right mind would switch from one vendor lock-in to another with the difference on investing SW development into the 2nd???? The resources spend on AMD will bind customers to AMD. It doesn't matter if RoCm is open source as long as it runs only on AMD. If RoCm would run on any AI chip (including Nvidia) then we would have a case of an interesting switch but then the question comes up, why buy AMD if RoCm doesn't require it?

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

#359

Post by Jlagreen »

SecretDreams wrote: post #142
Jlagreen wrote: post #128

Earlier quoted context omitted.

My cost base of Nvidia is $1 so for me to lose is that Nvidia gets back to way before COVID valuation. Nvidia is more worth than $1 per share on gaming alone.

Totally fair. If you've got a great cost basis, you can stress less. The question then becomes what feels worse: Watching a position you sold double or watching a position you're holding get cut in half?

There is one answer to this question which is called options. Selling short term OTM CCs with half of premium being used to buy ITM Calls (1/3 protection of the CC), OTM Calls (protection against gap up) and longterm OTM Puts (earn money when Nvidia nose dives).

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

#360

Post by rhetocj23 »

osn9363739 wrote: post #350
mmmBacon wrote: post #313

Earlier quoted context omitted.

I am personally paying $200/month for the ChatGPT pro version. It’s the best investment I’ve made in my career in a long time. It’s like having 2-3 direct reports. The alternatives provided by my companies are too slow and aren’t anywhere as good. If people start using it anywhere near how I’m using it, there will be profound changes to the workplace in the coming 3 years.

I have a senior that talks like this. Does everything through AI now. Barely writes anything himself. Has 5x'd his productivity. Like having his own team. Thing is his work is awful. The people who review his PRs have to spend 5x the time looking at his work. He's been pushed off to another team thank god. Not saying there aren't advantages and uses for AI. but if what you are saying were true (like having 2-3 report…

And then people turn around and hand-wave that away by saying: But youre assuming that the development of LLMs stop and they wont be able to address that problem.

Like Okay, it sounds like a valid point. The issue is the hand waving and the fact it is not grounded in reality.

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