Wall Street analysts explain how AMD’s stock will pay for Openai’s billions in chip markets

After AMD and Openai announced an extensive cooperation on Monday, chatter Immediately he turned to the unusual way, he will pay for AMD markets. Will use AMD’s stock to do it.

To summarize: Openai has agreed to help AMD improve the line of Nvidia competitors’ chips, GPU instincts, and to buy and develop 6 Gigawatts computers from AMD for many years. AMD said this deal is worth billions of revenue.

But Openai does not pay for it from its own revenue. Instead, AMD has granted Openai a shares load – up to 160 million AMD shares – which will deal with installments as some milestones are achieved. These milestones include specific increases in the price of shares, with the last installment dependent on AMD shares rising to $ 600 per piece, AMD revealed. They were negotiated in about $ 165 before the news hit and increased to $ 214 from the market near Monday after the announcement.

If the price of shares hit its marks and Openai achieves all its required contributions and Openai holds all the AMD shares, which sells no one along the road, Openai can do enough in AMD stock to pay for many GPUs. Stock could be worth about $ 100 billion.

“We noted that the final 6th installment requires ~ $ 1T market ceiling to give – ergo, if OAI will hold stock by the end of the deal, its share will be worth ~ $ 100B,” writes UBS Timothy Arcri in a research note on Tuesday.

But Arcuri believes that a more likely scenario is that Openai will sell AMD’s stock along the road to pay AMD’s bill. So, in essence, this is a plan for AMD to finance this customer’s purchases.

Still, argued by Arcuri, the ratification that Ai GPUs of AMD can handle Openai’s workloads and in any other AI workload is precious for AMD to make this gambit funding. “AMD underlined the ongoing customer dialogues beyond Openai and expects that this deal is ultimately accelerating AMD’s adoption momentum,” he writes. Specifically, OpenAi’s approval stamp gives him one to sell GPUs to many cloud service providers he already provides with CPU.

So, in the long run, those who will really pay for the giant years of OpenAI GPU GPU markets will be retail and institutional investors if they actually offer the price of shares.

In many ways, Nvidia also funded Openai’s markets for Nvidia products with its own $ 100 billion investment announced last month. The difference, of course, is that Nvidia’s multiple investments in Openai gave NVIDIA a share of the rapidly growing AI provider, not the other way around.

But what choice did AMD have? With the economy of engineering of an agreement that costs Openai Little, it takes an important position-up to 30% market share, USB estimates-one of the largest constructions of next-generation data centers that the world has ever seen.

While Arcuri admits that AMD’s deal is “undoubtedly less attractive” than Nvidia’s, “We see this as a significant validation of [AMD’s] Map of course that could snow to other customers. ”