AMD Signs $60 Billion AI Chip Supply Deal with Meta Over 5 Years

Advanced Micro Devices (AMD) has announced that it has agreed to supply up to $60 billion worth of Artificial Intelligence (AI) chips to Meta Platforms over a 5-year period. The arrangement includes warrants that could allow Meta to own as much as 10% of AMD. 

AMD will issue 160 million warrants at an exercise price of 1 cent. These will vest in stages if AMD’s share price reaches levels of up to $600, subject to technical and commercial conditions linked to the supply agreement. 

Shares in AMD rose more than 6% in early trading following the announcement. Nvidia shares were down around 1% ahead of its results. 

Scale of the Supply 

Under the contract, AMD will provide 6 gigawatts of AI chip capacity. Deliveries are set to begin with 1 gigawatt of the company’s forthcoming MI450 processor in the second half of this year. 1 gigawatt is roughly equivalent to the average electricity consumption of about 750,000 homes. The MI450 is for inference tasks, which involve processing user prompts and generating responses. 

The deal also includes 2 generations of AMD central processing units. One version will be customised for Meta’s data centre requirements, with a focus on balancing computing output and power use. 

Industry Context 

The agreement comes as technology companies increase spending on artificial intelligence infrastructure. Capital expenditure by Alphabet, Microsoft, Amazon and Meta is expected to total at least $630 billion this year, according to Reuters reports.  

Competition among chip suppliers has intensified. Since 2021, Nvidia’s shares have risen by more than 1,200%, outperforming AMD and the semiconductor index over the same period.  

Meta has previously agreed to purchase millions of AI chips from Nvidia and is developing in-house processors.  

Similar Industry Moves 

AMD signed a comparable long-term supply agreement with OpenAI last year. In October, Alphabet agreed to provide Anthropic with custom chips in a deal reportedly valued in the tens of billions of dollars.  

Long-term supply contracts have become more common as companies seek to secure chip access. 

Read More: Standard Chartered Rolls Out $1.5 Billion Buyback Amid Softer Trading Income! 

Conclusion 

The 5-year agreement provides AMD with a defined order pipeline tied to AI hardware. It also expands Meta’s roster of chip suppliers as it builds out data centre capacity. 

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