Meta Could Own 10% of AMD in Major Chip Deal
▼ Summary
– Meta has agreed to a multi-billion dollar chip deal with AMD, potentially acquiring a 10% stake in the chipmaker through a performance-based warrant.
– The deal involves Meta purchasing customized AI chips from AMD with a total capacity of 6 gigawatts to power its AI model development.
– This “circular” shares-for-chips transaction mirrors a similar recent deal between AMD and OpenAI, offering Big Tech customers a stake in exchange for large orders.
– The agreement signals a push by major tech companies like Meta to diversify their AI chip supply away from the dominant market leader, Nvidia.
– AMD’s stock surged 14% following the announcement, with the first tranche of shares to be issued to Meta in the second half of this year upon initial chip shipments.
In a significant move to secure the advanced computing power needed for artificial intelligence, Meta has entered into a massive chip agreement with AMD. This strategic partnership could ultimately see the social media titan acquire a substantial ownership position in the semiconductor company. The announcement fueled a sharp rise in AMD’s stock price, underscoring the high-stakes competition for AI infrastructure among technology’s largest players.
The core of the deal involves Meta purchasing customized processors from AMD with a total capacity of six gigawatts. As the company behind Facebook and Instagram accelerates its AI development, securing this volume of specialized computing power is a critical priority. AMD’s CEO, Lisa Su, emphasized the enormous value of the agreement, stating that each gigawatt of compute under this deal represents “double-digit billions.”
A unique feature of the arrangement is a performance-based warrant issued to Meta. This financial instrument grants Meta the option to purchase up to 160 million shares of AMD stock in stages, linked directly to its processor orders. The exercise price for these shares is set at a nominal one cent each. This structure creates a powerful incentive, aligning Meta’s procurement with a potential equity stake in its supplier.
This shares-for-chips model is becoming an emerging trend in the semiconductor industry. It closely resembles a previous agreement between AMD and OpenAI, where the AI research organization was offered a path to a ten percent stake. For AMD, these deals lock in major, long-term customers while sharing future financial upside. For tech giants like Meta, they secure vital supply and provide a hedge against the dominance of other chipmakers.
The transaction is a clear signal that large technology customers are actively seeking to diversify their supply chains beyond the current market leader, Nvidia. Just last week, Nvidia itself announced a separate multi-year pact to supply Meta with millions of its chips. This dual-sourcing strategy highlights the immense demand and strategic importance of AI hardware, with companies willing to invest heavily across multiple vendors to ensure they have the resources needed for the next generation of AI models.
According to Su, Meta will receive its first allocation of AMD shares in the latter half of this year, coinciding with the initial shipment of a one-gigawatt batch of chips. The warrant’s terms include specific share price milestones that must be met for subsequent tranches, with the final threshold set at $600 per share. The entire option agreement is set to expire in February 2031.
“This arrangement represents a major commitment from Meta to AMD’s technology roadmap,” Su explained. “We are also providing Meta with an opportunity to benefit from AMD’s success as a shareholder. Financially, the scale is tremendous, with each gigawatt of computing capacity carrying a value in the tens of billions.” The deal propelled AMD’s shares upward by 14 percent in pre-market trading, reflecting investor optimism about the company’s positioning in the lucrative AI chip market.
(Source: Ars Technica)
