[nerdix]

The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around.

In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share.

I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity.

[HarHarVeryFunny]

AMD is giving OpenAI warrants (cf options) to buy AMD shares at 1c/share, but these only vest if OpenAI goes thru with AMD purchases as intended.

It seems to basically give OpenAI an incentive to go thru with the deal.

[stingraycharles]

The stock popped quite a bit today, so investors seem to think this is a good deal for AMD. I tend to agree, may finally enable AMD to get a foot in the door in the whole large scale AI market.

[NaomiLehman]

AMD cards are good for inference or new low-level stuff anyway and more cost-effective. it's a good deal for everyone.

[ptero]

AMD has great hardware, but its software still leaves a lot to be desired for AMD to be a major AI hardware player. It takes years of unwavering leadership focus and hundreds of millions (probably billions) of dollars to get the software that works well for AI users.

The role the software played to get NVIDIA from a run-of-the-mill video card manufacturer to the top dog in AI hardware with 4T market cap is often underappreciated. My 2c.

[noir_lord]

> AMD has great hardware, but its software still leaves a lot to be desired for AMD to be a major AI hardware player. It takes years of unwavering leadership focus and hundreds of millions (probably billions) of dollars to get the software that works well for AI users.

It does but they have a capable CEO with a vision and broad support from the board - Ryzen was a decade long over night success.

[RossBencina]

Zen is a success. But Zen is hardware, and AMD is (historically) a hardware company. Delivering software is hard, even if you're a software company. I wouldn't take it as given that a good (hardware) CEO, vision, and board support are sufficient to build the required software organisation, especially given their track record on this front to date. It is more likely that Modular is AMD's software savior. I won't speculate on how probable that is.

[the-grump]

I'm in no position to judge the current CEO, but the Zen credit goes to

- Rory Read, under whom the program started

- Jim Keller who ran the program

- the engineers and managers who put the sweat in

- and, one must never forget, a rotating cast of executives and board members at Intel

[HarHarVeryFunny]

AMD being able to benefit from AI, and this OpenAI relationship, is a bit different though. This is about using AMD hardware for training and presumably inference of LLMs. The users will be people consuming OpenAI APIs and services running on AMD hardware, not people themselves writing custom ML applications using AMD libraries.

Maybe also worth noting that some of the worlds largest supercomputers (e.g. Oak Ridge "Frontier" exascale computer) are based on AMD AI processors - I've no idea what drivers/libraries are being used to program these, but presumably they are reliable. I doubt they are using CUDA compatibility libraries.

[throwaway2037]

Can someone with banking / deal-making experience explain to me how this warrant works? My point: If OpenAI exercises the warrant and buys 10% of AMD for 1 penny per share, where does AMD get the shares? Or will they do a secondary offering and dilute existing shares? Or do they take from treasury holdings (of shares)? Or does AMD coordinate a buyback of shares, then deliver to OpenAI?

[tim333]

They issue new shares. Or effectively already have by issuing the warrants.

[agentcoops]

I’ve seen a lot of confusion about this type of deal recently: notably, it is often taken to imply something more or less shady is going on. I’m not sure when such arrangements became a thing, but I know equity stakes have long been an important part of enterprise SaaS deals. The reasoning is relatively straight-forward: if a large client commits to a vendor in a way that holds some risk to the former and will materially impact the latter’s business — and especially if the client’s support of said vendor will directly or indirectly benefit their competitors who might also use this vendor — an equity stake is a way to offset risk with upside.

You can see this play out in the history of OpenAI. NVIDIA supported them from an early stage and in exchange received OpenAI equity to offset the risk. Now from a position of relative strength, OpenAI has become concerned about vendor lock-in and so is rationally exploring AMD. Yet, because any such deal will materially impact AMD’s stock price and there is risk both of losing time trying to train with new chips as well as of benefiting competitors if they work with AMD to improve their hardware offerings/APIs, it is reasonable to ask for equity upside. So, for the same reasons (increase in stock price and enterprise client who will help improve their product offering) only without risk, is it understandable why AMD would want to offer equity on such favorable terms.

TLDR; My sense is that the sudden skepticism towards this relatively common enterprise deal structure seems to derive from the understandable interest in identifying signs of an AI bubble. Such a bubble may (and indeed almost certainly does) exist, but I don’t think this is evidence thereof.

----

EDIT: I'm just clarifying something I saw in a lot of responses. My only point is that it is important to try and empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client.

I believe the recent Oracle and NVIDIA deals are cases of (1) that provide evidence of an AI bubble, but that this AMD deal is most likely a case of (2) that provides no further evidence.

[mrandish]

I generally agree with your point. OpenAI committing to buying a bunch of AMD hardware and doing the work to integrate support for it in their systems is a risk for OpenAI and a benefit for AMD (as demonstrated by the AMD stock popping on the announcement). So the warrants give OpenAI equity upside to offset risk.

I think the skepticism comes from the recent OpenAI/Oracle deal which seemed kind of circular due to paying with equity whose value was being inflated by the deal itself (if I understand it correctly). This deal seems more like an outright gift of equity if OpenAI goes through with the deal - so it could be thought of as almost a rebate or net discount on the cost of the GPUs.

[agentcoops]

Completely agreed. I note in a comment below that my only aim is to distinguish between deals that provide new evidence of a bubble and those that do not provide any further evidence towards that conclusion. I think the Oracle and especially the recent NVIDIA deals provide such evidence, while this AMD deal does not.

As @stingraycharles notes above, the AMD stock went up a lot already and this "may finally enable AMD to get a foot in the door in the whole large scale AI market."

[stingraycharles]

I think the skepticism is mostly aimed towards OpenAI making commitments to spend copious amounts of money, rather than the options that AMD is offering which makes sense.

[gmerc]

It's called Channel Stuffing and was always at least a red flag.

[bgwalter]

The skepticism is not sudden. Various kinds of circular deals were common in 1999/2000, shortly before the bubble burst, when telecom equipment makers subsidized their customers in order to prop up sales.

[agentcoops]

I understand that. I simply think there's some importance in at least trying to empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client.

Again, I'm in no way denying either that (1) exists or that there's almost certainly an AI bubble -- I just think this difference is material.

For example, I would classify the recently proposed deal between NVIDIA and OpenAI as a case of (1), but this deal between AMD and OpenAI as (2). Namely, because I think it's clear that the chips act as well as recent advancements by Chinese manufacturers are threatening to NVIDIA's market-leading position and OpenAI investigating new vendors suggests they have suddenly become concerned with reducing cost of goods. Indeed, if both the leading Chinese firms and OpenAI were shown to be able to work with other vendors without sacrificing speed to market it would materially impact NVIDIA's stock price. AMD, on the other hand, is not trying to subsidize an existing client, but convince a market leader to take a risk.

The NVIDIA deal, then, suggests to me that certain limits have been reached in the industry, while the AMD deal does not provide me with any further evidence as to the existence of a bubble.

[yousif_123123]

I think at least part of the 10% is if AMD stock reaches 600.

Not that I disagree that this looks weird. Why was that needed to be offered? Couldn't they just buy the AMD chips if they're good enough? Or Nvidia is it's better?

I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?

[AlanYx]

>Couldn't they just buy the AMD chips if they're good enough?

OpenAI would presumably need to raise money to buy the AMD chips.

The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI. Then OpenAI will presumably turn around and sell those shares (or borrow against them) to raise enough money to purchase the AMD GPUs.

[Aurornis]

> The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI.

There's no giving away of anything in the deal. The $0.01 per share price is only available if they purchase the GPUs.

It's more like one of those "free with purchase" deals where you're still paying for the product, but they throw in something to sweeten the deal.

They're not actually getting AMD shares at $0.01 each with no strings attached like many of the comments are assuming.

[kalap_ur]

They sign the purchase order on 1/1/26. AMD issues invoice to be paid in 30 days, that is 2/1/26. OpenAI triggers warrant and informs AMD on 1/2/26. OpenAI receives shares on 1/4/26. On 1/5/26 OpenAI and AMD announce the GPU purchase deal. On 1/30/26 OpenAI sells its shares in AMD. From proceeds, OpenAI pays AMD on 2/1/26. Thus, AMD financed OpenAI's GPU purchase via AMD's shares.

[Keyframe]

translated, AMD buys GPU from itself and gives them to OpenAI for free. OpenAI gets GPUs for free, AMD hopes the market will reward the deal enough to increase its valuation by more than the dilution cost.

I have to ask - is this even legal? I understand it can be, but somehow it feels wrong. I guess AMD would report revenue of those GPU sale and equity issuance / dilution as part of payment terms, and OpenAI would record hardware purchase expense as well as investment income or maybe capital gain when selling those shares. What makes it legal is probably it all needs to be transparently communicated in time?

[munksbeer]

The rest of the world trying to decipher this post because of the date format :headscratch:

[eldgfipo]

DD/MM/YYYY please

[AlanYx]

Yes, I was being somewhat flippant in my description of the transaction. But the net result of the transaction is the same. OpenAI can finance the GPU purchases by borrowing against the contractual guarantees it received from AMD to receive warrants in exchange for acquiring AMD GPUs. Whether the transaction is partially or entirely financed will depend on AMD's share price movement in the interim.

[DebtDeflation]

It's just round tripping with an extra step or two. AMD giving OpenAI money (via stock options) that they can use to buy AMD chips.

[lotsofpulp]

That “just” is doing a lot of work equivocating stock options with money.

If that were true, there would never be any business that failed.

[formerly_proven]

These are options with a 99.995% discount (as of this writing) on AMD stock.

[zerosizedweasle]

It's circular money flows.

[johnnyanmac]

Two circular flows now. Nvidia Oracle and OpenAI, and now this loop with OpenAI and AMD.

This really isn't the sign of a healthy economy.

[Pet_Ant]

It seems to me that there is an aspect of marketing to this deal. Nvidia has the mindshare, so this would help legitimise AMD offerings. This is almost product placement/sponsorship for AMD.

Also, this would battle test AMD's platform and provide enhancements so it's also a beta-testing service.

[rhetocj23]

Financing made out of thin air. Hilarious

[lesuorac]

Not thin air.

Existing AMD shareholders will have their holding diluted.

Or assuming banks loan them money, if say OpenAI goes under then the banks just lose that money.

[wmf]

When the stock goes from $150 to $600 that's not called dilution. Nobody cares about the number of shares in that situation.

[lesuorac]

The CEO of Tesla, Elon Musk, was sued over an extremely similar situation. So somebody will care.

That said, this is really about the principal. Sure, if I give you $10 and you give me a hamburger it's not like some illegal transaction. But to say the $10 comes from thin air is wrong. It doesn't come from thin air.

I would bet that if one day OpenAI decided to sell 10% of AMD the stock would crash from $600 to below $150. IIUC, there's 1.6B shares of AMD while only 54M shares trade daily so dumping 160M shares would tank their price [1]. If AMD gives OpenAI 10% of the company and OpenAI goes under, it's going to take AMD's share price with it.

[1]: https://www.marketwatch.com/investing/stock/amd

[zerosizedweasle]

It's a joke that it is so obvious what they are doing.

[alberth]

> allows OpenAI to buy 160 million shares at 1 cents a share.

> I think at least part of the 10% is if AMD stock reaches 600.

AMD market cap today is $350B (at $200/share).

AMD would need to 3x their market cap ($1,000B) to be at $600/share.

Which would mean that OpenAI could gain $100B in AMD stock, for the minuscule cost of only $1.6 million (160 million shares at 1 cent each).

--

Sam is spinning the world on his finger tip with these deals he's crafting.

[lucianbr]

What is AMD getting that's worth giving OpenAI $100B? Sure, they're giving it from other stockholders not from their pocket, but still. It's presumably a lot of value, there has to be a good reason, no?

Is it that Sam promises to somehow make AMD increase their market cap, or help at least?

[delusional]

> What is AMD getting that's worth giving OpenAI $100B?

The other $300B

[lucianbr]

Where is this other $300B coming from? Is OpenAI paying AMD $400B or what? I looked at the article but it seems disjointed and hard to parse for me. And I don't see where it mentions some $400B coming to AMD one way or another. It's implied... how?

Sorry, this isn't sarcasm or anything like it. I just don't get it and your answer does not help.

[delusional]

The traditional "efficient market" theory would be: synergies. The market believes that AMDs value increased BECUASE OpenAI now owns it. That is to say, the market believes that OpenAI taking a stake in AMD increases the value of AMD.

There are a host of different hypothesis you could pose to explain that. Maybe OpenAI has some secret sauce they'll share with AMD now that they have a stake. Maybe OpenAI will be more likely to buy from AMD in the future. Maybe AMD can use the experience they get serving OpenAI to better their products. Heck, maybe OpenAI will pump the stock by having Sam Altman talk about it on some podcasts.

It's impossible to disentangle all of those theories, because different investors will have different beliefs and you only get an aggregate.

[didibus]

I think the idea is that, OpenAI using AMD GPUs will help AMD become competitive against Nvidia in the AI space. If OpenAI is able to use them for their models, other companies will see AMD as a legitimate option and might switch to AMD for GPUs as well.

This would be where AMD is to gain new money.

OpenAI also has to gain, if it means access to more GPUs allows it to compete and be the winner of the LLM race. As the winner of the race, it would make new money, but also likely need to spend even more money on AMD to buy even more GPUs for years to come.

[jerf]

You have put your finger on the AI bubble's biggest problem right now. Companies are making promises that they are currently completely incapable of fulfilling, in the hopes that someday they can, and the stock market are valuating these promises as done deals.

Predicting the end of bubbles is well known to be a fool's errand, but if this AI bubble is still going in a year I can only imagine how casually these companies will have to be throwing around multi-trillion dollar promises to each other to keep the stocks pumped up.

[wmf]

Market validation I guess.

[SirMaster]

Is there any real reason AMDs market cap can't be close to what Nvidia's is? Or like even half of what Nvidia's is?

[dbbr]

My uneducated one word answer: CUDA.

[preisschild]

Could quickly change if open alternatives were suddenly more popular or with stuff like ZLUDA

https://github.com/vosen/ZLUDA

[alwahi]

if your castle had a moat like CUDA....

[jakogut]

How's Microsoft's Direct3D moat working out for them now? It's turned out to have been much less of a moat than it once was. Triple-A titles that are developed for Windows using Direct3D 12 are getting support on Linux through Proton within days of release, or even at launch sometimes.

[CuriouslyC]

CUDA isn't even a moat for inference, only for training.

[resters]

There is not. AMD didn't invest in tooling and interconnect technology the way Nvidia has, probably because of antitrust fears (or maybe mismanagement). But in terms of core GPU technology and fab, AMD is close to being a peer.

I've been saying this for several years now and it seems that someone finally listened :)

[blihp]

Try to use AMD GPU's for AI and you'll understand. Unless you have lots of your own engineers to throw at making their stuff work, it's easier for most companies just to keep throwing money nVidia's way.

[SirMaster]

I understand that it's that way today. But I am talking about "potential". If OpenAI and AMD engineers get their heads together and make some new software etc, couldn't AMD in theory become as valuable as Nvidia or at least half as valuable?

It seems like to take a 350M market cap company to 2B+ or a 6x+ increase in stock price would be worth doing for a few hundred million dollar investment in software and such?

[blihp]

By the time that could feasibly come to fruition, I suspect the AI bubble will have long since popped. Despite making decent GPUs for graphics, AMD can't seem to get its act together on the GPU compute front.

[lacker]

> Sam is spinning the world on his finger tip with these deals he's crafting.

That was my reaction too, this sort of weird deal seems very Sam Altman style.

Like Elon Musk - ironically, the archenemies are very stylistically similar.

[N70Phone]

> I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?

It's one big game of musical chairs, and everyone can hear the phonograph slowing down.

OpenAI is making these desperation plays because they've ran out of hype. GPT-5 "bombed", the wider public doesn't believe AI is going to keep getting exponentially better anymore. They're out of options to generate new hype beyond spewing ever larger numbers into the news cycle.

AMD is making this desperation play because soon, once the AI bubble pops, there'll be a flood of cheap unused GPUs & GPU compute. Nobody's going to be buying their new cards when you can get Nvidia's prior gen for pennies on the dollar.

[programjames]

I find it funny how people say GPT-5 "bombed". I noticed a significant improvement in maths and coding with GPT-5. To quantify were I've found the models useful:

- GPT 3.5: Good for finding reference terms. I could not trust anything it said, but it could help me find some general terms in fields I was unfamiliar with.

- GPT 4: Good for cached, obscure knowledge. I generally could trust the stuff it said to be true, but none of its logic or conclusions.

- GPT 4.5: Good for reference proofs/code. I cannot trust its proofs or code, but I can get a decent outline for writing my own.

- GPT 5: Good for directed thinking. I cannot trust it to come up with the best solution on its own, but if I tell it what I'm working on, it's pretty decent at using all the tricks in its repertoire (across many fields) to get me a correct solution. I can trust its proofs or code to be about as correct as my own. My main issues are I cannot trust it to point out confusion or ask me, "is this actually the problem we should be solving here?" My guess is this is mostly a byproduct of shallow human feedback, rather than an actual issue with intelligence (as it will often ask me at the end of spending a bunch of computation if I want to try something mildly different).

For me, GPT 5 is way more useful than the previous models, because I don't have a lot of paper-pushing problems I'm trying to solve. My guess is the wider public may disagree because it's hard to tell the difference between something better at the task than you, and something much better.

[N70Phone]

> I find it funny how people say GPT-5 "bombed".

I used scare quotes for a reason. It didn't "bomb" in the sense of failing [insert metric], it bombed in the sense that OpenAI needed it to generate exponentially more hype and it just didn't. (And on a lesser level, GPT-5 was supposed to cut OpenAI's costs but has failed to do so)

> I can trust its proofs or code to be about as correct as my own.

I have little to say about this, as I find such claims to be broadly irreplicable. GPT-5 scores better on the metrics, but still has the same "classes" of faults.

[CuriouslyC]

Gemini 2.5 was the first breakthrough model, people didn't know how to use it but it's incredibly powerful. GPT5 is the second true breakthrough model, it's ability to deal with math/logic/etc complexity and its depth of knowledge in engineering/science is amazing. Every time I talk to someone who stans Claude and is down on GPT5 I know they're building derivative CRUD apps with simple business logic in Python/Typescript.

[CyanLite2]

On the flip side of it (and where most institutional investors are mentally) is that if OpenAI is to ever achieve AGI, it must invest nearly a trillion dollars towards that effort. We all know LLMs have their limitations, but next phase of AI growth is going to come from OpenAI, Anthropic, Google, maybe even Microsoft, and not some stealth startup. E.g., Only Big Tech can get us to AGI due to sheer massive amounts of investments, not a traditional silicon valley garage startup looking for their Series A. So institutional investors have no choice but to continue to throw money into Big Tech hoping for the Big Payoff, rather than investing in VC funds like 10 years ago.

AMD did this deal because it's literally offering financing to them. OpenAI doesn't have access to capital markets like AMD does. So it's selling off shares of its own stock to finance the purchase of billions of dollars worth of GPUs. And the trick appears to be working since the stock is up 30% today, meaning it has paid for itself and then some.

[jakewins]

That “only big tech can solve AGI” bit doesn’t make sense to me - the scale argument was made back when people thought just more scale and more training was gonna keep yielding results.

Now it seems clear that what’s missing is another architectural leap like transformers, likely many different ones. That could come from almost anywhere? Or what makes this something where big tech is the only potential source of innovation?

[CuriouslyC]

Yup. LLMs can get arbitrarily good at anything with RL, but RL produces spiky capabilities, and getting LLMs arbitrarily good at things they're not designed for (like reasoning, which is absolutely stupid to do in natural language) is very expensive due to the domain mismatch (as we're seeing in realtime).

Neurosymbolic architectures are the future, but I think LLMs have a place as orchestrators and translators from natural language -> symbolic representation. I'm working on an article that lays out a pretty strong case for a lot of this based on ~30 studies, hopefully I can tighten it up and publish soon.

[CyanLite2]

The barrier of entry is too high for traditional SV startups or a group of folks with a good research idea like transformers. You now need hundreds of billions if not trillions to get access to compute. OpenAI themselves have cornered 40% of global output of DRAM modules. This isn't like 2012, where you could walk into your local BestBuy, get a laptop, open an AWS account, and start a SaaS over the weekend. Even the AI researchers themselves are commanding 7- and 8-figure salaries that rival NFL players.

At best, they can sell their IP to BigTech, who will then commercialize it.

[jakewins]

Sorry I still don’t understand.

Are you saying you disagree that a new architectural leap is needed and just more compute for training is enough? Or are you saying a new architectural leap is needed and that or those new architectures will only be possible to train with insane amounts of compute?

If the latter I dont understand how you could know that about an innovation that’s not yet been made

[nemomarx]

If it comes from anywhere else but it needs a lot of capital to execute, big tech will just acquire them right? They'll have all the data centers and compute contracts locked up I guess.

[N70Phone]

> And the trick appears to be working since the stock is up 30% today, meaning it has paid for itself and then some.

It's a bubble. The tricks keep working until they suddenly don't, and then all the prior tricks unwind themselves.

[chasd00]

no amount of investment is going to make AGI just appear. It's looking more and more like current architectures are a dead end and then it's back to the AI drawing board just like the past 30 years.

[rhetocj23]

Theres a phrase for this. Financial engineering.

[CuriouslyC]

The difference this time is that it's global coordinated collusion, and it's not just the superwealthy, it's states that are willing to go all in on this. If you thought the banks were too big to fail, the result here is going to be a nationalization of AI resources and doubling down.

[zerosizedweasle]

In other words they are stealing capital from the rest of the economy. Starving it.

[zerosizedweasle]

This is too top of the top to ignore. Everyone can see the scam now, it's a joke

[ralfn]

Because of the vesting milestones the stock price of AMD would go up by such an extent that creating more s hares would not dilute the share price.

Obviously, for the stock price to go up money needs to come from somewhere. It makes sense that this deal would lower the NVidia stock price, so technically it will be NVidia investors waiting too long to respond to this news that will be paying for this. A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't. The rest is just momentum and this would kill that.

The real winners will be TSMC and ASML

[Havoc]

> Obviously, for the stock price to go up money needs to come from somewhere.

Not convinced that’s true anymore in current climate. Bigger numbers announcements and AI Pixie dust works too apparently lol

[pixl97]

I mean the potential value comes from the future either way.

If you just print money and nothing else, it inflates and becomes worthless affecting all involved.

If the money turns into technical progress or products then the entire economy grows.

[Havoc]

> potential value comes from the future

In a strictly commercial sense yes but stock markets decoupled from that long ago. Whether it’s wallstreetbets up to shenanigans or a market crash it’s got little to do with actual future and more With sentiments. You’d hope it would revert to fundamentals eventually but markets sure seem happy to not do that

[xwolfi]

Sentiments about what ?

What is "actual future" ? Obviously we can only have feelings for it, not knowledge, right ?

[barchar]

The money actually has to be spent on real goods for which supply is inelastic for this to happen. If it's instead saved or used to pay taxes it won't cause any inflation.

I suppose the increased savings means there more potential for the private sector to cause inflation if everyone decides to dissave at once, but that's sorta a last resort.

[Ekaros]

You can keep inflating imaginary piles of money until someone tries to grab too much of it... Add in loaning against the valuations and you can keep doing it even longer...

[j4hdufd8]

> A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't

NVIDIA doesn't place transistors in particular configurations. Foundries do that for them. And it is currently common sense that the software is the moat, not the hardware design.

Good luck changing the ecosystem to use AMD.

[wqaatwt]

> that the software is the moat, not the hardware design.

For inference that’s hardly relevant, though?

For training its not exactly insurmountable either.

[Jlagreen]

On huge GPU clusters running inferencing the utilization of GPUs is key.

Imagine you have 1 million GPUs and you have 99% utilization of theoretical performance in the system with inferencing. That would mean 10k of GPUs are basically idle and draw power. You could now try to identify which ones are idle but you won't find them because utilization is a dynamic process so while all GPUs are under load not all are running 100% performance beause of interconnects and networking not providing data fast enough so your whole network becomes a bottleneck.

So what you need is a very smart routing process of computation requirements on the whole cluster. This is pure SW issue and not HW issue. This is the SW Nvidia has been working on for years and where AMD is years behing.

This is also why Jensen is absolutely right to say that competitors can offer their chips for free because Nvidia's key in TCO performance is the idea of one giant GPU so SW and networking allowing for highest utilization of a data center. You can't build a GPU the size of 1 million GPUs so you have to think of the utilization problem of a network of GPUs.

In the real world utilization rates are way below 100% so every % better of utilization is way more worth than the price of single GPUs. The idea here is that the company providing 2-3x higher utilization can easily ask for like 5x higher pricing per chip and will still deliver a better TCO.

[j4hdufd8]

GPUs are also used to speed up inference (the math is virtually the same). You think your ChatGPT queries are running on x86 servers?

[ralfn]

But do you think with the profit margins of NVidia, others won't be offering competing chips? Google already has their own for example.

From that perspective the notion that NVidia will own this AI future while others such as AMD and Intel standby, would be silly.

Im already surprised it took this long. The NVidia moat might he software, but not anything that warrants these kind of margins at this scale. It is likely there will be strong price competition on hardware for inference.

[wqaatwt]

> You think your ChatGPT queries are running on x86 servers

What makes you think? Or are all non Nvidia GPUs x86?

[acchow]

"Subsidizing" is one way to put it. But these are options not shares. We will discover in a few years that it was actually AMD who is paying OpenAI to take GPUs.

[hristov]

It sure seems that way. The stock options are worth, at the current price of AMD stock, about 32.8 Billion dollars. AMD is giving out these stock options essentially for free in exchange of open ai purchasing chips from AMD.

So open ai are getting a 32.8 billion dollars rebate. But on what? Here the press releases are a bit vague. They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money?

[mNovak]

I figure these GPUs are typically around 1kW (unclear if 6GW is including overhead like cooling, which might double(?) the power), so in the range of 3-6M GPUs.

If these are somewhere in the range of $10-30k (who knows what current or future models are contemplated), that's $30-180B. So clearly the low end doesn't make sense for the 'rebate', but at the high end a ~17% discount doesn't seem unreasonable.

[jasonwatkinspdx]

> They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money?

MI350 spec sheet says it's 1000 watts typical. So we're talking about something on the scale of a couple million chips.

[doctorpangloss]

> In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share.

Ha ha, OpenAI can afford this because your mom uses a grand total of 7 pieces of software owned by 5 companies, 4 are the largest public companies in the world, and the 5th one is OpenAI.

[colordrops]

Hopefully part of the contract is that OpenAI must make any software frameworks they build to utilize AMD GPUs open source.

[strangattractor]

Maybe they are using the $100 Billion NVidia investment to pay for this:)

If this ship sinks they are all going down together.

[giancarlostoro]

Similar to how Microsoft bought out nearly half of OpenAI, though they offered compute credits IIRC. I wonder how much into Microsoft's investment OpenAI is in.

Edit: Apparently what Microsoft owns is 49% profit-sharing interest in OpenAI, specifically in the 'capped profit' for profit subsidiary. So weird, but hey, it's still a slice of the pie. Plus they can exclusively sell access to the models.

[rvba]

Microsoft seems to have made a good deal: it got the models AND profits.

Also microsoft is pushing copilot to office and I think it will sell. Since they sell to general B2B and not only to the peogrammer niche.

AMD is trying to buy market share by donating 10% equity. I also think it is crazy

[giancarlostoro]

Yeah, I heard about when ChatGPT removed I think it was O4? apparently there's an entire community devoted to "role playing" or rather dating a character powered by the model. GPT5 broke their entire relationship. Me and a few friends agreed it might have been worth spinning up a dating GPT O4 based service for those people to pay to migrate their AI 'companions' to. Azure still has these "abandoned" models.

On the other note, it also helps OpenAI because they don't have to manage setting up all that infrastructure just to let others use the model.

[dist-epoch]

> I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity.

Yes, you are reading it wrong. The big winner here is AMD, not OpenAI.

If there is any signal here, it's that AMD is still in the AI game. AMD stock is up 30% on this news.

[nerdix]

I didn't mean to imply that there was a winner or loser. Just that AMD was subsidizing it's GPUs with equity.

I think there are logical reasons for both companies to agree to this deal. AMD is trying to break CUDA dominance. OpenAI is getting extremely cheap compute for expansion and they'd also benefit from the Nvidia monopoly falling if that ever happens.

[orky56]

OpenAI isn't publicly listed so it's hard to tell how this affects them from a "share price" concept. However for a company that's not public and only has capital from financing rounds and revenue, this gives OpenAI a lot more flexibility for the future and hedges risk while maximizing upside.

[iszomer]

Yes. We don't have a sku with OpenAI but we may soon have one and they will be competing with others already in the pipeline. Recall the recent AMD acquisition of ZT Systems' engineering wing and now manufacturing by Sanmina.

[boringg]

Its called hedging your risk: making sure Nvidia isn't the only game in town.

[coliveira]

This is money from nothing, right? They just found the tree of money.

[doodlebugging]

To paraphrase Dire Straits - The money from nothing and the chips for free.

[dagaci]

Lol and I had to pay >$60 a share for my little bundle of AMD!