[theli0nheart]

> As part of the arrangement, AMD issued a warrant that gives OpenAI the ability to buy up to 160 million shares of AMD for 1 cent each over the course of the chips deal. The warrant vests in tranches based on milestones that the two companies have agreed on.

This is money printing, just in the private sector. We know what happens when governments do it, and it's not good.

[john-h-k]

It’s quite specifically not money printing, because it’s backed by something.

It could be bad sure but it’s not money printing

[fauigerzigerk]

You're right. It's not really money printing, at least not directly. Only banks can print money.

What these recent deals do is inflate asset prices by making (future) revenues appear higher or perhaps just more certain than they really are.

Assets can be used as collateral for loans. If someone were to use their AMD shares as collateral for a loan at a commercial bank (not a margin loan), that would be money printing and you could print more of it today than before the deal was announced.

[SecretDreams]

> because it’s backed by something

If I finance a car backed by hopes and dreams, I'd be driving real good.

[theli0nheart]

Backed by what?

[aurareturn]

Ownership in a company.

[kaptainscarlet]

Compute resources.

[w3ll_w3ll_w3ll]

So like Bitcoin?

[denismenace]

Not the same, since if you buy Bitcoin, you don't have partial ownership of the machines used to mine and also these machines being used for a singular purpose which you cannot change.

[rvba]

It is backed by AMD stockholders, whose stock just got diluted.

It's like in that movie "Social network"

[vel0city]

And high end networking gear will always have a buyer, right Nortel?

[dsr_]

Lucent agrees: even used, the product will retain 90% of list price because the market has an infinite number of VC-backed buyers.

[diego_sandoval]

I'm very ignorant, will AMD shares get diluted? or how is it money printing?

[N70Phone]

AMD issues new shares and gets a penny (read: effectively zero) back for them.

ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI.

But all else is not equal. OpenAI only gets the shares if they buy AMD GPUs. The intent is that this offsets the dilution by making AMD overall more valuable. (This is why the stock price jumped on the announcement) It's a GPU subsidy paid for by AMD's shareholders rather than AMD itself.

The real risk is that this further entangles AMD in the AI bubble. OpenAI already has enormous datacenter construction obligations. The likelihood of them failing to meet these new obligations, and thus this deal falling through or otherwise not materialising, is pretty high. If the AI bubble goes *POP*, AMD will be hurting a lot more than before this deal.

[dist-epoch]

> ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI.

But the stock is up 30% on the news. So lose 10%, but gain 30%, so net 20% beneficial to equity holders?

[N70Phone]

Percentage math doesn't quite work that way. (130% * 90% for gaining 30% and then giving away 10% of that, is 117% not 120%)

But yes. That's the intent.

The "problem" is that OpenAI doesn't have any of the shares yet, and it's unclear how much they actually will get. Right now AMD shareholders have the full +30% gain with none of the loss. But will the +30% gain be wiped out on the news OpenAI won't be buying as many AMD GPUs? Only time can tell.

[layla5alive]

It's so much worse than that.

The first 0.1% of shareholders to sell would get the full +30%, then the next 0.1% would get ~28%, then the next... and by the time you got down to the last of the initial shareholders trying to liquidate, the price would likely be pennies on the dollar.

This is not value, but hot air.

The value these things represent is based almost entirely on the myth/hype + 401k index fund growth + inflation expectations at this point.

If you don't get dividends or voting power from your shares, all you have left is liquidation rights in the event of a bankruptcy. So, the shares are really worth their share of ~whatever AMD's assets are worth in a bankruptcy.

But, because we trade them in public markets, they're immediately worth whatever someone else will pay. And that's basically much more tethered to myth (and consistent 401k index fund growth + inflation expectations) than to fundamentals at this point.

Right now, 401k funds are buying AMD at this higher share price, with zero due diligence!

So, if growth stops / if job losses explode, then 401k contributions slow down (or reverse!), then markets fall, then margin calls happen, then markets fall more, more job losses...

There's a lot of cash sloshing around in the system from all the 2020s money printing, and there's a perma-buy-the-dip mentality that has come out of this extreme bull market (bubble market), so there is quite some extra resilience; but, the coyote is really going to have a reckoning once it finally looks down...

[rchaud]

The shares haven't been issued yet, so there isn't any dilution. Equity holders could sell their holdings now and benefit, because when OAI exercises the option and gets 160m shares for peanuts, they will sell those shares ASAP to bring in cash to pay for their orders of AMD chips.

[lotsofpulp]

It isn’t printing money (money supply was not increased, and no one has access to more money due to the contract signed between the two parties), but I assume it makes the poster feel good to be outraged and express it by writing something like that.

[theli0nheart]

AMD's valuation increased by over 30% this morning, so to say no one has access to more money because of this news is untrue.

I'm not outraged at all, I just think this sort of bizarre financial engineering is not a good sign. If the ROI was so obvious, why not, for example, simply issue bonds and buy AMD stock on the open market?

[lotsofpulp]

I wrote:

> and no one has access to more money due to the contract signed between the two parties

If a third party decides to pay a higher price for a publicly listed share because of the news of this contract, that is not printing money. The buyer of the shares loses money, the seller gains it, for a net change of zero in money supply.

[rchaud]

If OAI issued bonds, they'd be carrying all the risk. With these deals with Microsoft, Nvidia and now AMD, they're shifting some of that risk to powerful players in the "too big to let fail" category.

[theli0nheart]

Well, yeah, that's exactly my point. OpenAI is not issuing bonds because these transactions are way riskier than people are willing to admit.

[lotsofpulp]

Who is “people”? Investors and people familiar with finance are well aware of the deal and its risks, as they are public information.

[rhetocj23]

Indeed. Youre one of the few posters ive seen on here that gets it.

[tesdinger]

It is dilution. 160 million shares of AMD for 1 cent will be added. The idea is that the value increase of the remaining shares enabled by the OpenAI cooperation will be stronger than the decrease caused by dilution.

[tesdinger]

It's not money printing because shares are not classified as money in economics. Money is used for transactions while shares primary purpose is not transactions.