AMD Books $1.1 Billion Charge on OpenAI and Meta Warrants

AMD took a $1.1 billion noncash charge in the third quarter tied to stock warrants it granted OpenAI and Meta Platforms. The hit shows up in GAAP diluted earnings of $1.46 per share, and CFO Jean Hu says bigger quarterly adjustments are likely still ahead.

The warrants came attached to chip-supply agreements with the two AI companies. If performance milestones are met and the warrants are exercised, OpenAI and Meta could end up buying as much as 10% of AMD between them. That's a serious ownership stake handed to customers, not investors.

Why the charge landed now

The accounting impact appeared because shipments under the supply deals actually began during the quarter. Once the agreements move from paper to product, AMD has to mark the warrants to fair value each quarter.

Hu attributed the size of the charge mainly to two factors: AMD's higher share price and revised estimates of whether the warrant conditions will be met. A rising stock makes the warrants worth more, and that gain is a cost on the GAAP ledger even though no cash leaves the building.

What changes for practitioners?

For anyone tracking AMD on GAAP numbers, expect noise. Hu said quarterly fair-value adjustments should increase in coming quarters as AMD ships its MI450-series graphics processors and the agreements advance. Translation: the reported GAAP profit line gets choppier just as the flagship AI parts start moving in volume.

The good news for cash-focused analysts: the adjustments are noncash. Hu confirmed they won't touch non-GAAP earnings or free cash flow. If you run your models on adjusted figures, nothing changes.

For shareholders, the real question is dilution. If the warrants are exercised, AMD's share count grows, spreading earnings across more shares. Hu said the company won't give clarity on when vesting and exercise requirements might be reached until it provides further guidance in 2027 — so the dilution overhang sits on the stock for at least a couple of years.

The deal structure in brief

Here's what's on the table:

• A $1.1 billion noncash charge booked in Q3, reflected in GAAP diluted EPS of $1.46.
• Warrants tied to chip-supply agreements with OpenAI and Meta.
• Combined potential stake of up to 10% of AMD, contingent on performance milestones.
• Adjustments expected to grow as MI450-series shipments ramp.
• No impact on non-GAAP earnings or free cash flow, per the CFO.
• Further guidance on vesting and exercise timing due in 2027.

The structure itself is the story here. AMD is effectively paying its largest AI customers in equity optionality to win their silicon business — a $1.1 billion accounting entry is the first visible installment of that price. Whether it's cheap depends entirely on how much revenue the MI450 ramp actually delivers.