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AMD's Big Bet: Warrants for OpenAI & Meta Chip Deals
7 Oct
Summary
- AMD granted OpenAI and Meta warrants for 160 million shares each.
- Warrants vest only after substantial processor purchases by customers.
- The equity stake is a discount for enormous processor orders.
Advanced Micro Devices (AMD) has entered into agreements granting OpenAI and Meta warrants for up to 160 million shares each, with an exercise price of one cent. These warrants are contingent upon the purchase of AMD processors, requiring customers to deploy a significant capacity, up to six gigawatts, before any equity vests.
The structure ensures that AMD's stock dilution is directly tied to customer hardware purchases. No shares vest at the time of signing, with equity transfers occurring only after customers have bought the necessary hardware. OpenAI's final tranche of warrants also has a condition tied to AMD's share price reaching $600.
This arrangement positions the equity as a discount for substantial processor orders, with the total value of 320 million shares potentially reaching $210 billion at the current stock price, in exchange for a $3.2 million cash inflow. This represents a significant portion of AMD's market capitalization, but is defended as a strategic move for securing massive chip orders.
The valuation of AMD remains a point of discussion, with the stock trading at high multiples of earnings and enterprise value to EBITDA. The warrants themselves serve as a sustainability test for AMD's valuation, as they will only be fully realized if OpenAI and Meta continue to deploy AMD's technology at scale.
