On Tuesday, Advanced Micro Devices announced that it will sell up to $60 billion in artificial intelligence chip to Meta Platforms over a five-year period in an agreement that will enable the Facebook owner to acquire up to 10 percent of the chip company. The deal represents one of the biggest to date in the industry in terms of supplying AI chips. It also enhances strategic relationships between two giant technology players.
The stock price of AMD increased over 11% in the premarket trade following the previous session of 196.60. The magnitude and the long term character of the agreement was well received by the investors. The surge is an indication of increased confidence in the growing AI chip business of AMD.
Last year, the firm entered into a comparable agreement with OpenAI, which analysts considered a powerful benefit of its chips and software framework. The latter contract greatly increased the stock value of AMD at that moment. The Meta deal makes AMD even stronger in the race of the AI hardware.
Recent flow of chip supply deals signifies skyrocketing requirements of processors in the AI sector. Meta has also made another agreement with Nvidia to buy millions of AI chips. These alliances indicate the diversification of suppliers by hyperscale’s to gain capacity.
AMD and Meta Seal $60 Billion AI Chip Pact
 The collaboration highlights the enhancement of relationships between major AI firms as the anxieties about overlapping investments and round-trip deals mount. Meta and OpenAI will have a vested interest in the major suppliers. In the meantime, Nvidia is looking to invest in some of its largest clients.
AMD is going to provide six gigawatts of chips to Meta, beginning with one gigawatt of its upcoming MI450 flagship hardware in the second half of this year. The information was disclosed in a news briefing by the CEO Lisa Su. The release represents an indication of the launch of AMD into high-performance AI workloads.
The main investor fears of the AI market include the long lag before significant returns emerge on the huge expenditure on infrastructure. Bigger Techs keep spending billions to install data centers. Nevertheless, the markets are still pessimistic on the timing of the full realization of the profits.
According to Reuters calculations, Alphabet, Microsoft, Amazon, and Meta will spend at least $630 billion in capital expenditures this year. They are directing most of that spending toward AI chips and data center expansion. This massive investment highlights the intensity of the AI arms race.
Big Tech Spending Spurs Fierce AI Chip Competition
 AMD will also provide central processing units to meet the requirements of Meta besides its flagship graphics processors. A single version of the CPU will provide a compromise between high energy efficiency and performance. The agreement consists of two AMD CPU generations.
Lisa Su reported that Meta CEO Mark Zuckerberg has a lot of ambitious AI ambitions. AMD will embrace its entire technology stack in addressing the stated goals. The joint venture is indicative of tight-knit integration among the engineering firms.
Stock Warrants and Strategic Stakes Reshape AI Deals
 Under the agreement, AMD will also warrant 160 million shares at one cent. The warrant will be vested over time as the stock of AMD reaches several performance targets up to $600. Other technical and commercial achievements will also have to be achieved.
Nvidia stocks declined after it was announced, and Broadcom fell almost 2 percent. Broadcom is also a major provider of hyperscaler custom AI chips. Meta has also been reported to communicate with the use of Google, using theTensor processors with AI projects.
The industry analysts opine that the growing infrastructure at Meta needs a number of chip suppliers and a variety of solutions. As the demand gains momentum, the leading chipmakers are getting their place at the table. The partnerships are changing, which illustrates the interdependent and competitive aspect of the AI ecosystem.
