#AMD

AMD is challenging Nvidia’s AI chip dominance with a potentially multi-billion dollar GPU deal with OpenAI. This partnership aims to diversify OpenAI’s supplier base and mitigate antitrust concerns surrounding Nvidia’s 90% market share. AMD’s stock surged following the announcement, reflecting investor confidence. The deal is expected to generate significant revenue for AMD and positions the company as a stronger competitor in the AI hardware market, attracting regulatory attention amid concerns about market concentration and potential tariffs.

Nvidia CEO Jensen Huang expressed surprise at AMD’s strategy to grant OpenAI warrants representing a 10% stake in exchange for a multi-year purchase commitment of 6 gigawatts of AMD’s computing power. Huang highlighted the unconventional nature of the deal, contrasting it with Nvidia’s plan to invest $100 billion directly into OpenAI. He emphasized Nvidia’s ability to sell directly to OpenAI and noted OpenAI will need to raise capital to fund the Nvidia deal.

OpenAI and AMD have reportedly finalized a deal where OpenAI will take a 10% stake in AMD, driving AMD’s stock up. OpenAI plans to deploy 6 gigawatts of AMD’s GPUs, starting with 1 gigawatt in 2026. AMD will issue OpenAI a warrant for 160 million shares, vesting upon achievement of deployment and performance milestones. This partnership aims to alleviate supply chain concerns and diversify OpenAI’s hardware sources. This deal, alongside existing agreements with Nvidia, signifies OpenAI’s massive $1 trillion investment in AI infrastructure. Analysts highlight the interconnectedness and potential vulnerabilities within this AI supply chain.

Intel and AMD are reportedly in early talks regarding AMD potentially using Intel’s foundry services. This news boosted Intel’s shares by 7%. Securing AMD as a client would be a major win for Intel, validating its foundry strategy and attracting further investment. It would also signify significant trust from AMD, a direct competitor in the processor market. Diversifying to Intel could improve AMD’s supply chain. Intel’s foundry ambitions are supported by government and Nvidia investments as signals of confidence in Intel’s turnaround, boosting its shares nearly 77% year-to-date. Both companies declined to comment.

A Morgan Stanley report reveals high profitability in AI inference, with average profit margins exceeding 50% for “AI inference factories.” NVIDIA’s GB200 NVL72 leads with a near 78% profit margin, followed by Google’s TPU v6e pod (74.9%) and AWS’s Trn2 UltraServer (62.5%). Huawei’s Ascend CloudMatrix 384 achieves 47.9%. AMD’s MI300X and MI355X, however, show significant negative profit margins due to insufficient token generation efficiency.

Nvidia and AMD have agreed to remit 15% of their AI chip sales revenue in China to the U.S. government in exchange for export licenses. The White House confirmed the arrangement, initiated by the Trump administration, aims to reduce U.S. national debt, which exceeds $37 trillion. Nvidia’s H20 chip is currently the primary product affected. The Treasury Secretary sees this as mutually beneficial, allowing Nvidia to maintain its Chinese market presence while benefiting American taxpayers. This agreement may extend to other companies and sectors in the future.

In a CNBC interview, AMD CEO Lisa Su discussed topics ranging from export controls and AI’s transformative potential to competing with Nvidia and the Silicon Valley talent war. She playfully addressed the recurring question about her relationship with Nvidia’s Jensen Huang, revealing they are cousins through their maternal family lines. Su also emphasized AMD’s strategy of offering diverse solutions beyond direct competition with Intel and Nvidia. Her vision aims to showcase AMD’s unique capabilities to the world.

AMD is set to release its Q2 earnings, anticipating strong results and potentially record-breaking revenue. The company is projected to generate approximately $32 billion in revenue this year, nearing Intel’s level for the first time. While Intel’s Q2 revenue was $12.9 billion, its profitability declined, leading to reduced full-year guidance. AMD’s stock performance is strong, with market capitalization exceeding $280 billion, while Intel’s remains around $80 billion. AMD’s revenue is now more than half of Intel’s, a significant shift given AMD’s reliance on external foundries.

Shortly after Nvidia’s H20 chip sale to China was approved, AMD confirmed it will resume exporting its MI308 chip to the Chinese market. The U.S. Department of Commerce will review AMD’s license application. These AI hardware export restrictions, imposed by both the Biden and Trump administrations, have negatively impacted AMD’s financials, with potential losses reaching $800 million. The policy shift allowing MI308 exports is a boost for AMD, reflected in a nearly 5% stock price surge. This decision marks a policy reversal, particularly from the previous Trump administration’s stance.

Nvidia’s stock surged after CEO Jensen Huang’s Beijing visit sparked optimism about resuming H20 chip sales to China, adding almost $200 billion to its market cap. AMD also saw gains. The H20 is a modified chip designed to comply with U.S. export rules. Despite Nvidia’s optimism, uncertainties remain due to U.S.-China relations and growing competition from domestic Chinese companies like Huawei, which could impact long-term market share.