TLDR
- Advanced Micro Devices stock jumped 24% after announcing a major GPU supply deal with OpenAI worth potentially over $100 billion
- Three leading analysts raised price targets to $240-$250, citing competitive validation of AMD’s MI450 chips
- OpenAI received warrants for 160 million AMD shares that vest only when deployment milestones are achieved
- The partnership positions AMD to capture up to 20% of the AI GPU market currently dominated by Nvidia
- AMD stock has gained 69% year-to-date and analysts maintain a Moderate Buy consensus rating
Advanced Micro Devices stock soared 24% Monday after revealing a partnership with OpenAI. The deal involves supplying up to 6 gigawatts of GPU computing power over multiple years.
The ChatGPT creator will deploy AMD’s Instinct graphics processing units for AI workloads. This marks a major win for AMD in the competitive AI chip sector.
OpenAI received warrants for up to 160 million AMD shares at $0.01 each. This represents roughly 10% of the company’s outstanding shares.
The warrants vest only when hardware delivery milestones are met and AMD’s stock price rises. The structure ties OpenAI’s potential equity stake directly to AMD’s performance and execution.
Wall Street Boosts Price Targets
Top analysts quickly upgraded their AMD stock outlook following the announcement. Baird analyst Tristan Gerra raised his price target from $175 to $240 while maintaining a Buy rating.
Gerra believes the OpenAI deal validates AMD’s MI450 chip competitiveness. His research suggests the partnership could help AMD reach 20% market share in AI GPUs.
Each gigawatt deployed could generate double-digit billions in revenue for AMD. Management projects the deal could produce over $100 billion in revenue over several years.
Stifel analyst Ruben Roy increased his target from $190 to $240. He views AMD as becoming a co-design partner in OpenAI’s infrastructure plans.
Roy called the warrant structure investor-friendly since it only rewards OpenAI upon successful hardware delivery. He noted management expects similar deals in the pipeline.
Roth Capital analyst Suji DeSilva boosted his target from $200 to $250. He said the partnership establishes AMD as a credible large-scale AI infrastructure provider capable of competing with Nvidia.
Market Competition Intensifies
Nvidia currently controls over 80% of the AI chip market. The AMD-OpenAI deal creates direct competition in this space.
Interestingly, Nvidia recently invested $100 billion in OpenAI. Those funds are now indirectly supporting AMD through this infrastructure agreement.
OpenAI will use AMD’s newer rack-based solutions for training and inference workloads. The deployment begins with 1 gigawatt in 2026.
AMD stock continued climbing with a 4% gain in Tuesday pre-market trading. The stock has rallied 69% year-to-date.
Analyst Consensus and Future Outlook
Wall Street rates AMD as a Moderate Buy based on 24 Buy ratings and 12 Hold ratings. The average price target of $209.15 suggests 2.7% upside from pre-announcement levels.
Industry research indicates AMD’s MI450 chips will attract additional customers in 2027. Two hyperscale cloud providers are evaluating the chips, with one already committed.
AMD CEO Lisa Su called it a “true win-win” enabling ambitious AI expansion. OpenAI CEO Sam Altman said the deal provides necessary AI infrastructure capacity.
The 6-gigawatt deployment schedule extends over multiple years starting in 2026. OpenAI’s commitment validates AMD’s strategy in the high-performance AI accelerator market.
