Meta could end up owning 10% of AMD in new chip deal

Meta has finalized a significant multi-billion dollar agreement with AMD that might allow the social media powerhouse to secure a 10% ownership in the semiconductor company. This announcement has led to a notable surge in shares of AMD on Tuesday, reflecting investor optimism. Under this new arrangement, Meta will acquire tailored chips with a total capacity of 6 gigawatts, a crucial step as it accelerates its efforts in developing and deploying artificial intelligence models. AMD's CEO, Lisa Su, emphasized the substantial value of this deal, noting that 'each gigawatt of compute is worth double-digit billions.' Moreover, AMD has provided Meta with a performance-based warrant, granting the tech giant the option to purchase up to 160 million shares of AMD at an exercise price of merely $0.01. This arrangement will unfold in phases as Meta continues to place orders for processors. This innovative shares-for-chips strategy mirrors a previous agreement AMD made with OpenAI in October, which also involved a gradual stake acquisition. Following the announcement, AMD's shares, valued at a market capitalization of $320 billion, experienced a remarkable 14% increase during pre-market trading. This deal signifies a clear trend among major technology firms, indicating a shift towards diversifying their supply chains away from Nvidia, the current market leader. Notably, just last week, Nvidia disclosed a separate multi-year agreement with Meta to provide 'millions' of its chips in the future. Meta is expected to receive its first batch of AMD shares later this year, coinciding with the shipment of the first gigawatt of chips. The terms of the warrant include specific share price thresholds, rising to $600 for the final tranche, and it is set to expire in February 2031. Su remarked, 'In some sense, Meta is taking a big bet on AMD, and we are also giving Meta a chance to participate if AMD shareholders do well.' This partnership marks a pivotal moment for both companies in the competitive semiconductor landscape.