AMD Shares Surge 8.8% as Meta Seals $60 Billion Chip Deal
Tuesday saw a strong increase in Advanced Micro Devices' stock after Facebook's parent firm agreed to one of the biggest chip procurement
Quick overview
- AMD's stock surged 8.8% after Meta Platforms announced a landmark $60 billion deal for AI chips.
- The five-year agreement allows Meta to purchase AMD chips, including customized CPUs, and gives them a 10% stake in AMD.
- Meta's strategy appears to be diversifying its chip suppliers to reduce reliance on Nvidia amid ongoing supply chain issues.
- The deal is part of a broader trend in Big Tech, with major companies pledging significant investments in AI infrastructure.
Tuesday saw a strong increase in Advanced Micro Devices’ stock after Facebook’s parent firm agreed to one of the biggest chip procurement deals ever.
After Meta Platforms announced a historic five-year agreement to buy up to $60 billion worth of AMD artificial intelligence chips, Advanced Micro Devices (NASDAQ: AMD) shares jumped 8.8% on Tuesday, closing at $213.84. The deal also gives Meta the right to buy up to 10% of the semiconductor company.
According to the agreement, AMD will provide Meta with six gigawatts of chips, starting with one gigawatt of the company’s upcoming MI450 flagship GPU design in the second half of 2026. “Meta is making a big bet on AMD,” AMD CEO Lisa Su stated at a news briefing. Meta will also buy AMD central processors, including a customized CPU variant tailored to the social media behemoth’s unique performance and energy efficiency requirements.
In addition to technical and commercial benchmarks Meta must meet, the deal structure includes a warrant for 160 million shares at an exercise price of one cent, which will vest in tranches linked to growing AMD stock price targets up to $600.
Is Meta Diversifying Away from Nvidia?
For both businesses, the agreement is a major strategic step. In addition, Meta has reportedly discussed adopting Google’s tensor processing units (TPUs) and has an agreement with Nvidia for millions of AI chips. However, experts claim that the AMD agreement shows a conscious attempt to lessen reliance on any one chip supplier. “OpenAI had to go multi-vendor because they got to a size where being locked in with just Nvidia limits their growth,” Forrester analyst Alvin Nguyen stated. “Meta are already big enough where they need multiple options.”
The agreement is quite similar to one AMD made with OpenAI last year, which also included an equity position and was interpreted as a vote of confidence in AMD’s software ecosystem and processor capabilities. As Nvidia’s supply chain difficulties continue, AMD provides tools that enable workloads that were initially designed for Nvidia hardware to be transformed and run on AMD systems. This is becoming a more alluring feature.
Hargreaves Lansdown analyst Matt Britzman provided a more circumspect interpretation. “Meta is diversifying its chip suppliers to avoid bottlenecks in its AI goals,” he stated. “For AMD, this is a vote of confidence, but giving up a 10% stake suggests struggles with organic demand.”
Meta’s Shifting AI Strategy
The agreement also marks a more comprehensive development in Meta’s AI strategy. Following a well-publicized “talent spending spree” last year, which reportedly included signing bonuses of up to $100 million to entice researchers away from competitors, Meta seems to be shifting its focus from going head-to-head in the model race with firms like OpenAI and Anthropic to becoming a supplier of AI infrastructure and data center capacity.
“They seem to have shifted to, ‘We want to host AI infrastructure for you,'” Nguyen said. This goal is further highlighted by Meta’s enormous data center, which is presently being built in Louisiana and is expected to cost $27 billion.
According to Santosh Janardhan, head of infrastructure at Meta, the company would keep purchasing chips from various suppliers while simultaneously creating its own proprietary processors. “All of the chipmakers end up having sort of a seat at the table,” he stated.
Broader Market Impact
The news helped the wider markets recover from Monday’s AI-driven selloff. The Dow industrials and S&P 500 both increased 0.8%, but the Nasdaq composite gained 1%. A State Street fund that tracks the S&P’s software-and-services index saw a 2.7% rise, while stocks that had been severely impacted the previous session, such as IBM and Oracle, recovered.
“Investors are acknowledging, ‘hey, we went a little too far too fast,'” said Shannon Saccocia, chief investment officer of wealth at Neuberger Berman, who also attributed the improved sentiment to positive consumer confidence data and a separate announcement from Anthropic that detailed tools intended to integrate with existing enterprise software rather than replace it.
The AMD-Meta agreement comes as Big Tech’s AI expenditures are under close scrutiny. Together, the five biggest U.S. cloud and AI infrastructure providers—Oracle, Amazon, Microsoft, Alphabet, and Meta—have pledged to invest over $650 billion in 2026, which is almost twice as much as they did in 2025. The fundamental concern looming over the industry is whether those investments will result in proportionate profits. The news from Tuesday provides AMD with at least a partial response: there is a genuine and increasing need for Nvidia substitutes.
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