TLDR
- AMD stock surged 24% on Monday after announcing a multi-year deal with OpenAI to supply up to 6 gigawatts of GPU computing power
- Top analysts from Baird, Stifel, and Roth Capital raised their price targets to between $240-$250 from previous targets of $175-$200
- The deal includes warrants for up to 160 million AMD shares that vest only when hardware is delivered and stock price milestones are met
- OpenAI’s partnership validates AMD’s MI450 chips and could help the company capture 20% of the AI GPU market share
- The agreement could generate over $100 billion in revenue for AMD over the next few years according to analyst estimates
AMD stock jumped 24% on Monday following news of a major partnership with OpenAI. The chipmaker will supply the ChatGPT creator with up to 6 gigawatts of graphics processing units over multiple years.
The deal represents a big win for AMD in the competitive AI chip market. OpenAI plans to use AMD’s Instinct GPUs for both training and inference workloads.
The agreement includes a unique warrant structure. OpenAI received warrants for up to 160 million AMD shares at $0.01 per share, roughly 10% of the company.
These warrants only vest when specific deployment milestones are met and AMD’s stock price increases. The setup ties OpenAI’s potential ownership to actual hardware delivery and company performance.
Wall Street responded quickly with upgraded price targets. Three top analysts raised their outlook on the stock within hours of the announcement.
Baird analyst Tristan Gerra increased his price target from $175 to $240. He maintained his Buy rating on the stock.
Gerra believes the OpenAI deal validates the competitiveness of AMD’s MI450 chips. His industry checks suggest the chips could help AMD capture 20% market share in AI GPUs.
The Baird analyst noted that each gigawatt deployed under the deal could generate double-digit billions in revenue. Management expects the partnership could drive well over $100 billion in revenue over the next few years.
Stifel analyst Ruben Roy boosted his target from $190 to $240. He sees AMD becoming a co-design partner in OpenAI’s infrastructure roadmap.
Market Position and Competition
Roy believes the deal elevates AMD’s positioning in AI compute and rack-scale systems. Company management hinted more partnerships like this are in development.
The analyst called the warrant structure investor-friendly since it only rewards OpenAI when AMD delivers and succeeds. Roth Capital analyst Suji DeSilva raised his target from $200 to $250.
DeSilva said the deal establishes AMD as a credible large-scale AI infrastructure provider. The company now directly competes with Nvidia, which controls over 80% of the AI chip market.
OpenAI will use newer AMD rack-based solutions for their computing needs. The deployment schedule starts with 1 gigawatt in 2026.
Deployment Timeline and Technology
The partnership creates an interesting dynamic in the AI chip industry. Nvidia recently invested $100 billion in OpenAI.
Those funds are now indirectly supporting AMD through this new infrastructure deal. The situation sets up direct competition between the two chipmakers.
AMD stock added another 4% in Tuesday’s pre-market trading. Year-to-date, the stock has rallied 69%.
Wall Street currently rates AMD as a Moderate Buy. The consensus includes 24 Buy ratings and 12 Hold ratings.
The average analyst price target sits at $209.15. That represents a 2.7% upside from current levels before Monday’s surge.
Industry checks by Baird indicate the MI450 will help AMD gain AI GPU share with other customers in 2027. Two hyperscalers are considering the chips, with one already committed.
AMD CEO Lisa Su called the arrangement a “true win-win” that enables ambitious AI buildout. OpenAI CEO Sam Altman said the deal helps the company build enough AI infrastructure to meet its needs.
The partnership validates AMD’s strategy to compete in the high-performance AI accelerator market. OpenAI’s deployment of 6 gigawatts of AMD GPUs starts in 2026 with the initial 1-gigawatt rollout.
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