Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Meta has agreed to buy billions of dollars’ worth of customised chips from AMD, part of a multiyear AI infrastructure deal that could also result in it taking a roughly 10 per cent stake in the Nvidia rival.
The social media giant said on Tuesday it will acquire chips with a total power consumption of 6 gigawatts — enough energy to power about 5mn US households for a year — as it races to develop and deploy its AI models.
AMD also issued Meta with a performance-based warrant, giving it the option to acquire up to 160mn AMD shares in tranches at an exercise price of $0.01, as the Facebook owner buys successive orders of processors.
The shares-for-chips arrangement represents the latest “circular” transaction in the industry and mirrors a deal AMD struck with OpenAI in October, in which the ChatGPT maker was similarly offered a 10 per cent stake in the chip group over time.
Shares in AMD, which has a market capitalisation of $320bn, surged 14 per cent in pre-market trading.
The transaction also marks the latest sign that big tech customers are looking to diversify supply away from market leader Nvidia, which last week announced its own multiyear deal with Meta to supply it with “millions” of its chips over the coming years.
Meta will receive its first tranche of AMD shares in the second half of this year when the first gigawatt of chips is shipped, said AMD’s chief executive Lisa Su. The terms of the warrant are also tied to certain share price thresholds, escalating to $600 for the final tranche. The warrant expires in February 2031.
AMD shares closed at almost $197 on Monday, giving the company a market capitalisation of $320bn. Nvidia is valued at $4.65tn.
“In some sense, Meta is taking a big bet on AMD, and we are also giving Meta a chance to participate if AMD shareholders do well,” Su said. “From a financial standpoint, each gigawatt of compute is worth double-digit billions.”
Su said the warrant structure would help “make sure that we are always a clear seat at the table when [Meta] are thinking about what they need next”.
Meta’s chief executive Mark Zuckerberg said he expected AMD to be “an important partner for many years to come”.
Meta has said that it will almost double its AI infrastructure spending this year to as much as $135bn, as US tech giants rush to build the data centres to train and run AI software. It is already one of AMD’s biggest AI chip customers.
“We don’t believe that a single silicon solution will work for all of our workloads,” said Santosh Janardhan, Meta’s head of infrastructure. “There’s a place for Nvidia, there’s a place for AMD and . . . there’s a place for our own custom silicon as well. We need all three.”
Under the deal, AMD will build a custom version of its MI450 AI chips for Meta. They will be used primarily for “inference” workloads, the process of running models after they have been trained.
Increasingly creative funding arrangements to support massive AI infrastructure build-outs have emerged in recent years, leading to warnings about circular financing.
AMD has, for example, helped data centre builder Crusoe secure a $300mn loan from Goldman Sachs by offering a backstop guaranteeing the use of its chips if Crusoe is unable to find customers after installing them in an Ohio facility.
Tech giants such as Meta, historically flush with cash, are meanwhile facing the prospect of tapping bond and equity markets or stemming capital returns to shareholders to help fund their unprecedented infrastructure plans. The Facebook and Instagram parent raised $30bn in October, marking its biggest bond sale to date.