AMD Books $1.07 Billion Charge for Warrants Tied to OpenAI and Meta Chip Deals

AMD said the charge reflects shipments under the two agreements starting to ramp up, according to Reuters. The disclosure came alongside third-quarter results in which the chipmaker forecast faster-than-expected growth in 2027 on the back of data centre demand. Reuters said the shares rose 8% in extended trading.

The Reuters report did not say which line of AMD's income statement carries the charge.

How the Warrants Work

In February, AMD agreed to sell up to $60 billion of AI chips to Meta over five years. In return, Meta received warrants that could let it buy up to 10% of AMD if shipment and other commercial milestones are met. OpenAI signed a similar agreement last year that gives it the option to acquire up to roughly 10% of the chipmaker. Unlike Meta's warrant, OpenAI's includes thresholds tied to AMD's share price, Reuters reported.

If the warrants fully vest and are exercised, the two companies could end up owning large stakes in AMD for as little as one cent a share. The final value of those stakes will depend on where AMD's share price stands when they are exercised.

AMD chief financial officer Jean Hu said dilution for existing shareholders starts once OpenAI and Meta meet the vesting and exercise conditions, Reuters reported. AMD expects to give more guidance on the timing during 2027.

The Analyst View

Analysts quoted by Reuters described the agreements as a strong vote of confidence in AMD's AI chips and software, while saying they are unlikely to dent Nvidia's lead in the market. Bob O'Donnell, chief analyst at TECHnalysis Research, said that "incentives played a role in some of their sales", and pointed to "pent-up demand for a serious alternative to Nvidia."

AMD also has a chip purchase arrangement with Anthropic that includes a commitment by AMD to invest in the AI developer, according to Reuters.

Why It Matters

The charge is the clearest figure so far for the cost of the equity incentives that have become common in AI hardware deals. Reuters listed several similar arrangements: Cerebras has issued warrants to OpenAI against a $20 billion commitment, Marvell has given Google warrants for a potential $12.2 billion stake, and Qualcomm has granted warrants to Amazon in a $60 billion deal.

These structures have drawn criticism that the AI boom is increasingly circular, with the same companies acting as customers, suppliers and investors in one another. For AMD investors, the warrants have two costs. The first is accounting charges like this one, which arrive as chips ship. The second is possible dilution, which arrives as the warrants vest. Both will grow if the OpenAI and Meta deals deliver the volumes AMD is counting on.

The disclosure comes as investors pay closer attention to how the AI build-out is financed. Big technology companies have been raising large sums in the bond market this week, and Asian chip stocks fell sharply on Wednesday on worries about AI funding.