AMD's 6 GW chip deal with Meta mirrors OpenAI agreement, raising questions about AI infrastructure spending

AMD has signed a massive 6 GW chips-for-stock deal with Meta that mirrors almost exactly the agreement it reached with OpenAI last October, raising questions about the sustainability of AI infrastructure spending as the industry grapples with a potential bubble.

The Deal Structure

Meta announced it will purchase 6 gigawatts worth of custom Instinct GPUs from AMD, with the first 1 GW tranche arriving in the second half of 2026. These initial chips will be based on AMD's MI450 architecture and represent the first deployment of custom AMD AI GPUs.

The agreement extends beyond GPUs, with Meta becoming the "lead customer" for AMD's sixth-generation EPYC CPUs, specifically the Venice and Verano chips designed for AI workloads. This positions AMD as a key hardware partner in Meta's Compute initiative to accelerate its AI datacenter fleet development.

The Circular Financing Component

Like the OpenAI deal, this agreement includes a warrant for Meta to purchase up to 160 million shares of AMD common stock at $0.01 per share. The shares vest incrementally as Meta purchases computing capacity, with the final tranche only vesting if AMD's stock price reaches $600 per share.

AMD shares jumped on the announcement but remain at $211 as of publication. The company defends the structure as "performance-based," ensuring both companies benefit from the partnership's success.

Market Context and Concerns

AMD's deals with Meta and OpenAI follow shortly after both companies struck large-scale agreements with Nvidia, creating a complex web of chip supply relationships. Together, these two deals commit AMD to supplying 12 GW of GPUs to what the company calls "the two companies with the most ambitious AI infrastructure plans."

However, industry analysts are increasingly concerned about AI infrastructure spending sustainability. Recent reports suggest the AI bubble may deflate as enterprises defer spending until 2027, and Meta itself has acknowledged it will listen into AI conversations to personalize ads, hinting at pressure to monetize these massive investments.

Financial Implications

While neither company disclosed specific pricing, AMD stated it "expects to generate double-digit billions of revenue per gigawatt over the course of the 6 GW agreement." This suggests potential revenue in the hundreds of billions, though the company's spokesperson acknowledged this depends on the AI market maintaining its current trajectory.

The nearly identical structure of both deals raises questions about whether AMD is using a standardized approach to secure major AI customers, potentially at the expense of more tailored, value-driven partnerships.

Industry Impact

AMD's aggressive push into the AI chip market represents a direct challenge to Nvidia's dominance. The company is positioning itself as a viable alternative for companies looking to diversify their AI infrastructure suppliers, though the massive scale of these commitments suggests significant risk if AI infrastructure demand doesn't materialize as expected.

As the AI industry continues to invest heavily in infrastructure, the sustainability of these massive deals remains uncertain. The circular financing structures employed by AMD may provide short-term incentives for partnership, but they also tie the company's fortunes more closely to the success of its largest customers in an increasingly volatile market.

The Register continues to monitor developments in the AI chip market and will provide updates as more information becomes available about the long-term implications of these massive infrastructure commitments.