Feb 24 (Reuters) – Advanced Micro Devices said on Tuesday it has agreed to sell up to $60 billion worth of artificial intelligence chips to Meta Platforms over five years in a deal that allows the Facebook owner to purchase as much as 10% of the chip firm.
The company had signed a similar pact with OpenAI last year, which was hailed as a vote of confidence in its chips and software, significantly boosting its stock price.
COMMENTARY:
GADJO SEVILLA, ANALYST, EMARKETER, NEW YORK
“The structure of the Meta/AMD deal squarely fits the emerging ‘closed‑loop hyperscaler’ pattern: a mega‑cap AI customer gets long‑term access to a key supplier’s hardware, often in exchange for equity exposure and other strategic commitments. It is also a strong indicator that the AI hardware segment is diversifying and challenging longtime leader Nvidia since companies like Meta now see other options for AI compute.”
“AMD has placed itself in a very competitive position to serve the demands of hyperscalers seeking alternatives to Nvidia. It is doing so technologically and through it’s co-design approach combining silicon, systems, and software to optimize AI training.”
DAN COATSWORTH, HEAD OF MARKETS, AJ BELL, LONDON
“For a long time, it looked as if Nvidia was the only chip player in town, but that is increasingly not the case. Meta’s deal with AMD is a blow to Nvidia, especially as the potential for the Facebook owner to take a stake in the chip maker could result in a closer working relationship going forward.”
“It is standard practice for big companies to source goods and services from different companies to avoid over-dependence on one supplier. Meta had already signaled that it would continue to spend big, so the scale of the deal with AMD isn’t out of the ordinary. What’s potentially jarring investors is the structure of the arrangement. The return of circular transactions in the industry gives investors something else to worry about, alongside potentially excessive levels of spending by hyperscalers more broadly on AI, and disruption in multiple sectors from the technology.”
“The minor drop in pre-market trading for Meta would suggest its shareholders are approaching the news with some caution. However, there is a party going on at AMD as it gets one up on Nvidia.”
MATT BRITZMAN, SENIOR EQUITY ANALYST, HARGREAVES LANSDOWN, GREAT BRISTOL AREA, ENGLAND
“Meta’s AI arms race just shifted up another gear. The company has struck a huge deal with AMD to buy around $60bn of AI chips over 5 years, with an option to take a 10% equity stake in the chipmaker. Coming hot on the heels of Meta’s recent Nvidia agreement, the message couldn’t be clearer: AI infrastructure is priority number one. Meta is locking in supply, diversifying away from a single vendor, and doing whatever it takes to make sure its AI ambitions aren’t bottlenecked by chips.”
“For AMD, this is a vote of confidence in its next-generation AI hardware – but having to give up a 10% stake suggests it could be struggling to generate organic demand. That said, delivering solutions at this scale is a new test. Designing competitive chips is one thing; manufacturing, deploying and supporting them in volumes this large is another. AMD shares jumped on the news, and after a sharp pullback in recent months, the positive reaction will come as welcome news to investors.”
“Zooming out, this deal underlines just how dominant Nvidia still is, a stock which features on our Five Shares to Watch list for 2026. AMD had to sweeten the agreement with a potential equity option – something you simply don’t see Nvidia needing to do to secure demand. Nvidia remains the clear top dog in AI chips, with unmatched scale, software, and customer pull. AMD is making progress and carving out a role, but with Nvidia’s results due tomorrow, we’re expecting Jensen Huang to once again remind the market who’s in charge.”
GIL LURIA, HEAD OF TECHNOLOGY RESEARCH, DA DAVIDSON, PORTLAND, OREGON
“AMD’s deal with Meta serves as significant validation for AMD’s GPU technology. Meta is committing a significant part of its buildout to AMD and AMD gets a second anchor customer after OpenAI. The main negative impact from the deal is on Broadcom. Since Meta has a separate large deal with Nvidia and will likely continue to rely on Nvidia for most of its GPUs, the supplier getting crowded out appears to be Broadcom. Meta decided to rely on AMD as a second supplier instead of its home built chips it has developed with Broadcom.”
(Reporting by Zaheer Kachwala and Kritika Lamba in Bengaluru; Editing by Devika Syamnath)
Comments