AMD Books $1.07bn Warrant Charge as Meta and OpenAI Chip Deals Bite

By Amara Osei

Advanced Micro Devices recorded a $1.07bn non-cash charge, or 66 cents a share, in the third quarter ended September 26 to account for warrants issued to OpenAI and Meta Platforms, as shipments under the agreements start to ramp up.

The charge, disclosed on Tuesday, is the first sizeable imprint on AMD's profits from a strategy of trading equity stakes in its future success for long-term chip commitments from two of the largest buyers of AI silicon. Investors looked past the accounting hit: AMD forecast faster-than-expected growth for 2027 on surging data centre sales, and its shares rose 8% in extended trading, lifting Intel, Nvidia and Broadcom stocks with it.

What did AMD give its customers?

In February, AMD agreed to sell up to $60bn worth of AI chips to Meta over five years. The deal grants the Facebook owner warrants that could let it buy as much as 10% of the chipmaker if it meets certain milestones. A similar agreement with OpenAI last year gave the start-up the option to buy up to about 10% of AMD.

If the warrants fully vest and are exercised, OpenAI and Meta could each acquire a large stake for as little as a penny per share — substantially increasing AMD's share count. The warrants' ultimate value depends on AMD's share price at exercise. There is one structural difference between the two deals: OpenAI's warrant includes AMD share-price thresholds, while Meta's does not.

Dilution begins once the customers satisfy vesting and exercise conditions, which include shipment and other commercial requirements. AMD expects to give more guidance in 2027 on when those conditions could be met, finance chief Jean Hu said on Tuesday's analyst call.

Why are chipmakers paying customers in equity?

The warrants reflect a growing use of equity incentives by chip and AI cloud companies to secure massive, long-term purchases from a small group of AI customers. The structure also exposes the circular nature of the AI boom, in which companies are simultaneously customers, suppliers and investors in one another.

AMD has struck a separate chip-purchase arrangement with OpenAI rival Anthropic. That agreement runs the other way: it includes a commitment by AMD to invest in Anthropic.

The pattern extends beyond AMD:

• Chip start-up Cerebras granted OpenAI warrants against a $20bn commitment.
• Marvell Technology issued Alphabet's Google warrants giving the search giant the right to buy a potential $12.2bn stake.
• Qualcomm gave Amazon warrants in a $60bn deal covering its AI data centre chips.

Can AMD dent Nvidia's dominance?

Analysts read the deals as a major vote of confidence in AMD's AI chips and software, but not as a threat to Nvidia's hold on the market. Nvidia continues to sell every AI chip it can make.

"While I do believe incentives played a role in some of their sales, I believe the bigger issue is that there is pent-up demand for a serious alternative to Nvidia, and AMD's products are now starting to compete on price-performance metrics," said Bob O'Donnell, chief analyst at TECHnalysis Research.

The equity sweeteners buy volume; they do not yet buy market leadership. AMD is paying for its seat at the AI table in shares.