The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of GPUs from AMD. GPUs worth $100bn, and somewhere to put them. OpenAI can't afford that - not even close.
So they need to raise financing. On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. You take the stock options as collateral. You lend the money, OpenAI buy the GPUs, the AMD stock goes up, the option conditions are met, and even if OpenAI didn't pay you back the options will let you recover your investment.
However, this loan is far less safe than it first appears. The problem is that although lending the money allows openAI to buy GPUs, this doesn't necessarily cause AMD stock to rise. Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. And you'll be left with worthless collateral and a big loan to a company which can't afford to pay it back. So they haven't actually magically created financing at all. They just created the illusion of it. It's very clever. But it's fake. The real announcement will be when or if someone lends OpenAI cash.
Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.
OpenAI's bet is that its frontier models will be so far ahead of the current status quo that, if they are the only ones providing those frontier models, they will be able to name their price (to end users and advertisers alike) while increasing their share of spend in the space.
But even today, last-generation and open-source models form a meaningful portion of adopted solutions. Not every application in 2028 will need the AGI-approaching GPT-10 - especially if those applications can leverage a relatively small amount of code, perhaps even written by that GPT-10, that can in turn orchestrate (say) DeepSeek V5 running on compute that can be obtained for pennies on the dollar.
OpenAI could become a victim of its own success, and cause a house of cards to take down the global economy in the process. I personally hope this doesn't happen, but there is real risk here.
There will be the WebVans of the AI boom era, we just don't know their names yet. There also will be Ciscos and Suns that will never reach their high-water mark ever again, or become obsolete in a few years, and sold for less that what people expect.
I really don’t know what a full complement of good tools mean! your team is very large your team is very cheap You spend an awful lot on Ai tooling!
We spend about £50 - £200 a head per month on AI tooling.
Assuming everyone was at the top of of that scale (most aren’t) it’s like ai for 50 employees = cost of 1 employee.
...i just wish the code it generated was decent.
It's still pretty funny money. Companies are buying those subscriptions to show their shareholders how trendy they are, not because they're useful to them. And the subscription price points are widely speculated to not even have positive gross margin, yet alone starting to recoup any investment. It's far from clear that there's any kind of viable business here.
I can’t just copy-paste what comes out. But I have to say I’m able to get substantially more done as it saves me a lot of grunt work. You do have to learn how to use it like any other tool. I have found that it’s helped me sharpen a lot of my own skills in multiple areas and improved my understanding of systems I’m working on. I am able to learn new things much faster because it has a real-time feedback mechanism.
I can’t speak to your direct report but I’d be concerned about falling behind as a leader if you aren’t using it in the course of your regular work.
Like Okay, it sounds like a valid point. The issue is the hand waving and the fact it is not grounded in reality.
So while one person is getting a 5x increase in productivity, one or two get a corresponding 5x decrease.
It feels like the dotcom bubble was recent to those of us who lived through it, but 25 years is about a generation. But a lot of the people in the markets now (and running companies) were kids back then and thus weren't really aware of what was going on.
If I understand the math correctly. Amd could offer the GPUs at around a 20x discount to OpenAI on a deal worth 10-20 billion and be profitable on both amortized R&D and Cost of Goods sold.
Nah, nothing in the current market is based on fundamentals.
Sure it is. Stock prices are based on supply and demand. Oh, did you mean company fundamentals? Hmm.
BTW that demand is all coming from 401k contributions. The powers that be are terrified of a downturn causing too many job losses tanking the whole thing.
In theory yes but OpenAI doesn't have a stock and in the word of AntiChrist Peter Thiel : "We only have AI, there is nothing else out there except for AI" so with the belief still strong to carry at least up until GPT 7 OpenAI will find ways to present itself to the world as capable of putting to use the AMD GPUs and AMD will benefit from it.
And honestly the anti Christ is right. Vibe coding is already bigger than self driving cars, the metaverse and all that stuff that emerged during covid
I don't think lending money against stock options would be considered at all safe.
However the deal may work along the lines of:
Investors buy AMD shares, send the price up.
OpenAI uses it's option to buy shares for 1c, sell the to the investors for far more, use the profit to buy AMD GPUs.
So it potentially works very well for OpenAI, ok for AMD and questionably for the investors funding it buy buying AMD shares.
Whether this works out or not no longer depends on the specifics of the deals. This either works big picture or it's all a smoking crater
Not commercially to an extent that supports the massive infra buildout
A couple of neat productivity tricks don’t pay for a 500 billion stargate rollout
This level of denialism if insane.
What exactly do you want?
What level of proof would be enough for you to admit that AI has worked out?
Thanks.
So I continue to sit here laughing. Keep coming back with weak evidence though.
> Can you point me to the effect on earnings of the customers of said AI tools
Just looking at the overview of Levels' ventures listed in the Bio:
http://PhotoAI.com $141K/m
http://InteriorAI.com $29K/m
http://RemoteOK.com $34K/m
http://Nomads.com $14K/m
http://levelsio.com $14K/m
http://pieter.com $6K/m
You can see that his old ventures (which he has built over many many years) are bringing in less money than his new ventures (built over fewer years). How is this not "effect on earnings of the customers of said AI tools"? Levels is a customer of AI tools. His earnings have gone way up as a result of AI tools.
Wonder what they been doing so far, really, as it is only tinygrad that been voraciously pushing for these drivers in recent years, not even AMD themselves. Besides, given ClosedAI's the wonderful record of releasing stuff to the public, even if this happens, may benefit only inside tech, not the general audience.
With AMD's stock jump today it's net worth increased about $35billion, close enough in value to those stocks option they gave away (if it was redeemed instantly).
It's too much of a coincidence so I'm guessing market makers and institutional shareholders priced it in their trading today.
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.
It seems to basically give OpenAI an incentive to go thru with the deal.
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.
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.
- 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
Another honorable mention would be Suzanne Plummer
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.
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.
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.
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."
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.
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?
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.
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.
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?
If that were true, there would never be any business that failed.
This really isn't the sign of a healthy economy.
Also, this would battle test AMD's platform and provide enhancements so it's also a beta-testing service.
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.
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.
The rest of your comment doesn't make sense.
If OpenAI fails then its going to have to liquidate the company. Selling 160M shares of AMD is going to tank it's price.
[1]: https://en.wikipedia.org/wiki/List_of_lawsuits_involving_Tes...
[2]: https://ir.tesla.com/press-release/tesla-announces-new-long-...
Whatever the merits of the lawsuit, it wasn't about the pay package being too diluting.
If OpenAI fails, it will be acquired and/or the shares will be sold in bulk. They're not going to log in to etrade and sell 160m shares on the open market.
But this is exactly the point. If somebody is going to sue Elon when he 13x the share price then of course somebody is willing to sue AMD if they 4x it.
Elon's pay package was voted on by shareholders. AMD's deal with OpenAI had none of that so if anything it's more ripe for a lawsuit.
> 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.
Is it that Sam promises to somehow make AMD increase their market cap, or help at least?
The other $300B
Sorry, this isn't sarcasm or anything like it. I just don't get it and your answer does not help.
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.
Imho AMD itself needs to have a theory, which underpins their signing of the deal. For my clueless self, that investors have various theories and we don't know what they are is ok-ish, but that AMD has a theory but keeps it secret yet it gets the result of stock rise... is fishy.
Everyone is going in circles making suppositions and estimations based on who knows what. That can't be healty, can it? There used to be requirements that publicly listed companies act with some level of transparency, and those requirements existed for a reason. I guess. I am certainly no expert in finance.
It's not secret at all. Companies announcing a deal like this usually include some PR material alongside it [1]. In this one, the quote is:
“Our partnership with OpenAI is expected to deliver tens of billions of dollars in revenue for AMD while accelerating OpenAI’s AI infrastructure buildout,” said Jean Hu, EVP, CFO and treasurer, AMD. “This agreement creates significant strategic alignment and shareholder value for both AMD and OpenAI and is expected to be highly accretive to AMD's non-GAAP earnings-per-share.”
[1]: https://www.amd.com/en/newsroom/press-releases/2025-10-6-amd...
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.
The issue here is now, that every large customer of AMD will now probably ask for equity. AMD has put itself into a pit hole with that deal.
If I were Hyperscaler CEO, I would basically ask for the a similiar deal as OpenAI or no business. Sorry Lisa Su but as a CEO giving equity to a customer is an absolute red flag because it starts a negative spirale you can't stop.
It seems that no matter the discount, OpenAI wasn't ready to make deal without equity. This tells you exactly how AMD is seen in the AI world.
OpenAI will take the compute for free and help AMD to rise stock value but it won't help AMD one bit because if AMD remains in the current position then OpenAI and Hyperscalers can get great deals with equity from AMD. The incentive isn't now to improve AMD to be competitive but to squeeze everything out of a company being desperate enough to give equity to customers.
And AMD will feel this. Nvidia will remain dominant because of ecosystem and supply. AMD can't easily replace Nvidia in supply chain and Nvidia is already strongly entrenched in many AI compute operations. And on the other side Hyperscalers are focused on their own chips (even OpenAI LOL) so they will tell AMD "Give us equity or no deal". This deal might be really the worst AMD deal yet because AMD is telling the world "here, you can get free AI compute from us financed by our equity". And while it might push AMD share price the very share price will drop 80-90% like any other one in case of an AI bubble pop.
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.
That reminds me a lot of Enron. As long as the stock keeps going up everything is fine but when it does t everything comes crashing down.
I've been saying this for several years now and it seems that someone finally listened :)
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?
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.
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.
- 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.
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.
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.
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?
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.
At best, they can sell their IP to BigTech, who will then commercialize it.
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
In other words, it’s is MORE likely that an OpenAI/Google/Microsoft/Grok/Anthropic gets us closer to AGI than a startup we haven’t heard of yet. Simply because BigTech has cornered the market and has a de facto monopoly on compute itself. Even if you had raised $10 billion in VC funding, you literally can not buy GPUs because there is not enough manufacturing capacity in the world to fill your order. Thus, investors know this and capital is flowing to BigTech, rather than VC funds. Which creates the cycle of BigTech getting bigger, and squeezing out VC money for startups.
It's a bubble. The tricks keep working until they suddenly don't, and then all the prior tricks unwind themselves.
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
Not convinced that’s true anymore in current climate. Bigger numbers announcements and AI Pixie dust works too apparently lol
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.
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
What is "actual future" ? Obviously we can only have feelings for it, not knowledge, right ?
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.
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.
For inference that’s hardly relevant, though?
For training its not exactly insurmountable either.
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.
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.
What makes you think? Or are all non Nvidia GPUs x86?
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?
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.
MI350 spec sheet says it's 1000 watts typical. So we're talking about something on the scale of a couple million chips.
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.
If this ship sinks they are all going down together.
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.
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
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.
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.
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.
Basically, AMD is giving up equity to buy its way into the AI market.
It's fantastic news, because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips.
We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.
Too fast to jump to conclusion. I'd say they will work together to develop software specifically designed for OpenAI products. It is a giant question mark whether we'll get libraries for general purpose computing out of this.
Ask yourself: What would first-class PyTorch/Triton and Jax support for AMD hardware do to Nvidia's dominance and pricing power?
I would not put my bets on private companies' goodwill. I'd rather believe they'll do whatever is most important for their business priority, understand things at their face value, and then hope for the best.
I'm not betting on anyone's goodwill, I'm betting on OpenAI's and AMD's self-interest. Please don't attack a straw-man.
Tech companies have the following options:
1. Buy Nvdia high performance stack with stable and fast support and deploy your SW developers to quickly get started
2. Buy AMD whatever stack and deploy your SW developers to make a lot of ground work
3. Develop and deploy your own chips and use your SW developers to make your SW from scratch but exactly as you need it
The only reason they might go with No. 2 is if AMD gives them the HW more or less for free but maybe even then will mix 2 + 3 if they don't want 1. And AMD deal is showing exactly this, AMD has to give free quity to get a customer for their HW.
What people don't get, who in their right mind would switch from one vendor lock-in to another with the difference on investing SW development into the 2nd???? The resources spend on AMD will bind customers to AMD. It doesn't matter if RoCm is open source as long as it runs only on AMD. If RoCm would run on any AI chip (including Nvidia) then we would have a case of an interesting switch but then the question comes up, why buy AMD if RoCm doesn't require it?
The story here is about the future. Over time, OpenAI would benefit if AMD hardware becomes competitive for training too.
Nvidia currently gets to charge whatever the market can bear on its dominant training hardware.
If AMD hardware becomes a real alternative for training, Nvidia will be forced to compete on price.
At scale training won’t be able to avoid comms entirely, while many models can fit in a single MI300 for serving.
> "If they even share openly"
That fact that this even needs to be pointed out but is normalized in the AI industry. Sadly, in the history of Open AI, they've been anything but open.
The fat margins is in training, in NVidia hardware.
That said, I'd much rather be leading in training than inference, of course. Nvidia still leads in inference, by the way.
If there is a bubble, AMD just gave away $160m for nothing in return.
https://ir.amd.com/news-events/press-releases/detail/1260/am...
Where'd you get this number? The equity is worth closer to 34bil if fully realized?
> If there is a bubble,
and your
> if fully realized
Can both be correct at the same time.
IF this is a bubble, then, yes, AMD gave away a lot of money.
OTOH, IF things turn out exactly perfectly, then AMD just got a discount on a 34b purchase.
Companies don't actually get any money when their stock goes up. Maybe AMD owns a lot of their own stock and can sell it off to see a gain, but the stock simply rising doesn't contribute anything to AMD.
OpenAI estimate that it takes around $50bn to stand up a 1GW datacenter. This deal is 6GW worth of chips. Their projected revenues out to YE-2029 are $300bn. OpenAI will spend a decades worth of revenues building & filling the datacenters to house these chips, before accounting for their AI research, training, or inference spend.
Like best possible scenario is OpenAI merely optioning from literally everybody because they don't think they have a shot at getting any capacity otherwise. There is just no possible way that they can actually afford all of the buildouts. For that matter, there's not even any possible way for all of these buildouts to actually be completed.
We definitely are ! The BIG question is - what chapter are we in ?
If you’re into tech & startups, he wrote Going Infinite about FTX, and Flash Boys about high frequency trading.
A “non-profit” that somehow buys stakes, signs multi-billion supply deals, and moves markets based on promises of future models — all while technically owning nothing tangible. They’re leveraging their own paper value to buy more paper value.
It’s circular finance at scale: every deal increases the perceived valuation, which then becomes collateral for the next one. No audited revenue stream, no proven business model - just a loop of hype, compute contracts, and self-referenced worth.
At some point, someone’s going to ask what exactly is being sold here besides narrative.
This artificial boom in “AI infrastructure” is basically the last engine keeping the charts pointing up. When that music stops, there’s nothing underneath it but leverage and power bills.
>Sam Altman has it. You could parachute him into an island full of cannibals and come back in 5 years and he'd be the king. If you're Sam Altman, you don't have to be profitable to convey to investors that you'll succeed with or without them.
Looks like he's doing well wheeling and dealing us cannibals.
As a comparison of stocks over the last 5-years:
1-Year 5-Year Market Cap (Today)
------ ------ ---------
AMD 20% 150% $0.35T
NVIDIA 50% 1,250% $4.5T
So a healthy portion of AMD overall 5-years gain are just from this announcement today.
And OpenAI ($0.50T) is currently valued more than AMD ($0.35T) itself.
https://www.reuters.com/technology/openai-hits-500-billion-v...
It’s definitely lacking in stability and polish compared to what NVIDIA has built. (Ask me why I’m on my third rebuild of LAMMPS this morning…)
Are we supposed to pretend that this is normal? Does anyone not feel like this push for AI is a last ditch effort to save the global stock market, that it MUST work out?
The government BORROWS printed money, the FED emits debt against that money, and the hole keeps getting bigger. You certainly solved a short term problem, but you also created a long term one.
Meanwhile, people make less children, immigration is reduced, debt buyers, the ones receiving the interest, are starting to think twice, someone will be left with the bag and it's gonna be the 401k bondholders relying on these debt interest to finance their non productive retirement.
BTC is being bought maybe due to it's non correlation with those debts, but it's also printed virtually with absolutely no tangible value (the network can just collectively decide to change its rules with no legal repercussion), and gold definitely has tangible value (at least, it makes your wife smile and stop haggling when she gets some to put around her neck, so infinite value right there vs btc) and is bought in India and China to prepare for catastrophe, but it has many issues (heavy, hard to transport cross border, dangerous and expensive to store, concentrated in vaults against paper gold with all the issues that this creates etc)
If someone was writing the script to “The Big Short 2” about the AI bubble they might struggle to come up with some of these things with a straight face.
Finance folks are salivating at the once in a generation opportunities ahead when this whole thing crumbles. CNBC seems to have at least one segment a day on “What’s your AI bubble burst play?”
In a very real sense, OpenAI caused a 25% increase in AMD’s value by announcing the deal, and was allowed to capture about half of that out-of-nowhere value for itself by these options.
AMD just doesn’t know how to compete with Nvidia. The best it can do is charge 10% less and release GPUs about the same level of underwhelming performance as Nvidia.
Maybe they wouldn’t need to sell equity if they made better faster cheaper products than Nvidia.
But Lisa Su can’t bring herself to compete. Which is very strange because she brutally competed with and destroyed Intel.
Maybe making cutting-edge GPUs is actually quite an engineering challenge, and not entirely down to the competitive will of the CEO?
It’s the positioning and pricing that isn’t competitive.
What's the standard that they're underwhelming relative to? I thought Nvidia was the current big fish there.
Meanwhile AMD doesn't try to disturb the market, they keep their pricing at "price of similar NVidia card - $50". They aren't going to gain market share that way.
I mean, they could recognize that Nvdidia has better ecosystem and they could provide something similar (CEO's job is to set this), but saying "just make better chips" is kind of funny.
I mean, I worked in companies where the CEO couldnt figure this out, but come on. It's AMD.
They know exactly how to compete with Nvidia but choose not too.
>But Lisa Su can’t bring herself to compete.
Because she is colluding with her cousin Jensen.
I dunno, doesn’t have the ring if credibility to it.
Doesn’t resonate for me as how most American companies do business.
Yes, AMD was doing that as long as Nvidia was mostly avoiding high performance CPUs.
But with The Nvidia-Intel partnership all bets are off, hence you're seeing this deal now.
Literally the whole big tech will melt. There are banks that are backing up certain GPU deals and those will be hit with billion losses as well.
Imagine once they have to depreciate those $1T+ of GPUs, data centers and the like that can't even be on resale for gaming.
Imagine when economic blocks like the EU and BRICs starts to reject more US software, when so much of those Big Tech revenues are made abroad. The recent geopolitics plays being a key factor.
This looks really bad.
So...after the next election and a bunch of significant US governance reforms.
Cash-poor OpenAI pledges/promises about ~$100B in purchases.
AMD makes back the money on (a) 30% volume discount is normal? (b) stock pop from AI hype (AMD popped up ~$100B market cap on the news.) ?
On top of the gpus... AMD has offered cheap equity to sweeten the deal and help them get financing to pay for the gpus.
Am I getting this right?
It was inevitable, this basically marks the end of affordable gaming GPUs, upgrade while you still can
Existing AMD shareholders are getting a great deal; their shares are worth 30% more today and will be worth 5X more if OpenAI gets to use their option. Yes, there is some dilution for existing shareholders, but only after a 5X gain.
OpenAI basically self financed the buying of tens of billions of dollars of GPUs by increasing the enterprise value of AMD, and taking a cut of that. And the increase in value is not just the announcement, but the integration work needed to make AMD GPUs as good as Nvidia for inference.
So if I read this right then an existing shareholder benefits up to the point where AMD stock reaches the $600/shr level and after that it becomes a dilution.
For the maximum benefit to existing shareholders, the stock price must get near $600/shr and if that looks unlikely they should consider other investments on less speculative terms. This whole AI thing feels like I'm watching the soapy fluid flow along the bubble exterior to form a droplet of soap on the bottom, thinning and weakening the bubble until it pops due to fluid film rupture at the top of the bubble as the droplet leaks away due to gravity.
For some reason the OpenAI portion of this deal is quoted in gigawatts rather than number of MI450s purchased, which makes it hard to tell how much of that $100 billion is from OpenAI. It's probably around $80 billion.
And now imagine what will happen when OpenAI makes deals with Nvidia and AMD. Do you think Hyperscalers will just watch?
I expect Musk to make a $1 trillion deal soon. I guess, that's why he wants to get the $1 trillion from Tesla.
And do you think Meta, Amazon, Microsoft and Google will stand by while Altman and Musk are buying future supply from Nvidia and AMD?
I love that. As an investor in Nvidia, I hope that these future promises will push the stock 4-5x quickly in Cisco fashion because then I can sell and retire in my 40s with a huge pile of money watching the bubble explosion on some beach on an island :)
What is more painful to you, missing some gains on the way up or holding positions that have flipped from positive to negative very rapidly?
Markets like this, the moves will be violent in both directions, not just on the way up.
Nvidia is more worth than $1 per share on gaming alone.
Watching a position you sold double or watching a position you're holding get cut in half?
Those GPU's will finally push pixels again :)
> Those GPU's will finally push pixels again :)
Have they ever? I wonder if, say, an H100 even supports graphics APIs.
Funnily enough, H100s are already old hardware, and soon will all get fully depreciated.
Billions and billions of depreciated assets!
Just like we knew self-driving AIs are not reliable.
The magical thinking was assuming they would just get better.
There will definitely be takers though. Can see scientific community for example loving some cheap GPUs
It's "seller financing" but to a degree we've never seen before in an industry (which create these "circular" effects).
There's a good HN thread from 2-days ago on this subject (200+ comments).
Maybe I can get quoted in a sidebar:
“Hey Econ students, we normal people could see that the AI market was extremely gamed. We can see the investment feedback loop. It is just that the organizations continuing it have control over so much money, they don’t have to stop and ask society in general for permission to continue. Really this is a symptom of the wealth inequality crisis that they covered chapter…”
The reasoning behind such a deal are usually not a good sign for the underlying health of the companies involved.
It certainly wouldn't be for fear of a lack of investment. AMD is up 30% from this announcement alone.
OpenAI may own 10% of AMD, and that seems like OpenAI investing in AMD in exchange for buying 6GW of GPUs and 160million in stock.
But if it results in their stock reaching 600$, then AMD will give back the money that OpenAI spent on GPUs as 10% stock options into AMD.
Which sounds like, no one is really investing in each other, they're both like exchanging money back and forth, where both hope to gain some extra money by propping up the AMD stock with the announcement, hoping it helps make AMD more competitive on the GPU landscape.
Did I get it right?
So day 1 valuation is mostly hype, but that hype may translate into real value later.
Completely agree, I’d expect all of those to take a big hit, and some more than others, but I don’t think Microsoft or Google would disappear. As for the SP issue, if this trend continues, people might start seeing the SP as the opposite of diversification (at least in the stocks market sense) and will have to start looking for something else.
BTW, I’m almost an all-in SP investor myself so I’ll have to navigate that dip too, lol
After the predicted bloodbath, do we get some infrastructure and products worth keeping at the end of it? If so, does that mean the system can limp on, after even more money has printed, or do we get to another big fork in the road where systematic change is required?
Sora 2 takes a lot of visual shortcuts. The innovation is how it does the story planning, vocals, music, and lipsync.
We'll have that locally in 6 months.
A local model basically allows me to experiment with running an agent 24x7, 365 days a year with continuous prompting.
SaaS won't be able to match that.
I've been using Qwen3:32b on a 32GB M1 (asahi) and it does most of what I need, albeit a bit slow, but not slow enough that I´d pay monthly for remote ad delivery.
I suspect this huge splurge of hardware spending is partially an attempt to starve the market of cheap RAM and thus limit companies releasing 128GB/256GB standalone LLM boxes.
If I had to guess I would say that's probably 10 or 15 years away for desktop class hardware and longer for mobile (maybe another 10 years).
Maybe the frontier models of 2040 are being used for more advanced things like medical research and not generating CRUD apps or photos of kittens. That would mean that the average person is likely using the commodity models that are either free or extremely cheap to use.
At work:
That I don't rent $30,000 a month of PTUs from Microsoft. That I can put more restricted data classifications into it.
> LLM inferencing isn't particularly constrained by Internet latency
But user experience is
The general advantage is that you know that you're not leaking information, because there's nowhere to leak it to. You know the exact input, because you provided it. You also get the benefit of being able to have on device encryption, the data is no good in the datacenter if it's encrypted.
This is money printing, just in the private sector. We know what happens when governments do it, and it's not good.
It could be bad sure but it’s not money printing
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.
If I finance a car backed by hopes and dreams, I'd be driving real good.
It's like in that movie "Social network"
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.
But the stock is up 30% on the news. So lose 10%, but gain 30%, so net 20% beneficial to equity holders?
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.
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...
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?
> 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.
It bears repeating my original question: if the risks are so minor, why is OpenAI simply not issuing bonds and buying AMD stock with the proceeds?
> Do you recall what “people familiar with finance” did with CDOs and mortgage-backed securities during the financial crisis? That didn’t work out so well either, despite all parties being aware of the risks.
There was straight up fraud involved in the underwriting for the mortgages where verification (or rather underwriting itself) was not being done.
This deal is a transparent bet on an outcome with no deceived party.