AMD Deal Boosts Stock 5% on Tuesday
OpenAI and Advanced Micro Devices are now partners with OpenAI taking a 10% share in the chipmaking company.
Quick overview
- OpenAI and AMD have struck a deal where AMD will transfer 10% of its stake to OpenAI.
- AMD's stock surged over 23% following the announcement, with an additional 5% increase the next day.
- OpenAI plans to deploy 6 gigawatts of processing units using AMD's technology to overcome current limitations with ChatGPT.
- The partnership positions AMD strategically in the growing AI market, potentially allowing it to compete more effectively against Nvidia.
OpenAI and Advanced Micro Devices (AMD) announced a deal this week for the chipmaker to give 10% of its stake over to the artificial intelligence company.
AMD stock shot up after news of a massive deal with OpenAI broke. AMD stock rose more than 23% as a result on Monday and then another 5% so far on Tuesday as trading begins.
Greg Brockman, president of OpenAI, said that the company is trying to scale up so that they can reach everyone in the world with their technology. For the next few years, they will deploy around 6 gigawatts of processing units using AMD’s Instinct product. They will start off with an initial release of chips that amounts to one gigawatt.
The new program is meant to circumvent the problem of low processing power that OpenAI has run into when using ChatGPT. There are products and features they want to release that they cannot due to ChatGPT’s technical limitations. To cement the deal, OpenAI will be buying up 160 million shares of AMD’s stock.
AMD Stock Expected to Climb
With two straight days of gains so far, this may not be the end of the AMD stock rally. The company is positioned strategically within the growing artificial intelligence market, which is seeing much of the stock market growth right now. Even when other markets have dipped this year, AI has grown tremendously.
The current deal with OpenAI is already worth billions of dollars, and that is an investment that could continue to profit traders who are watching the company closely. AMD is a direct competitor to Nvidia (NVDA), but while Nvidia is dominating the market and exercising a stock rally that has extended for years, AMD may be undervalued.
With so much focus on Nvidia and how well their stock is performing, investors who choose AMD could see unexpected profits. The remainder of the AI market will be fought over by companies like AMD, but it is a massive market and growing, and AMD is in the right place to grab a large market share. What analysts are noticing is that Nvidia’s competition is becoming fiercer, and technology is growing so fast that it may only be a matter of time before some other company outpaces Nvidia and offers the next step in AI before they do. With OpenAI on their side, AMD now has a better chance to take a larger portion of the AI niche.
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