13 ms·
The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around. In case you're wonderi
by nerdix 1y ago
The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around.
In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share.
I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity.
- giancarlostoro 1y agoSimilar to how Microsoft bought out nearly half of OpenAI, though they offered compute credits IIRC. I wonder how much into Microsoft's investment OpenAI is in. Edit: Apparently what Microsoft owns is 49% profit-sharing interest in OpenAI, specifically in the 'capped profit' for profit subsidiary. So weird, but hey, it's still a slice of the pie. Plus they can exclusively sell access to the models.
- rvba 1y agoMicrosoft seems to have made a good deal: it got the models AND profits. Also microsoft is pushing copilot to office and I think it will sell. Since they sell to general B2B and not only to the peogrammer niche. AMD is trying to buy market share by donating 10% equity. I also think it is crazy
- giancarlostoro 1y agoYeah, I heard about when ChatGPT removed I think it was O4? apparently there's an entire community devoted to "role playing" or rather dating a character powered by the model. GPT5 broke their entire relationship. Me and a few friends agreed it might have been worth spinning up a dating GPT O4 based service for those people to pay to migrate their AI 'companions' to. Azure still has these "abandoned" models. On the other note, it also helps OpenAI because they don't have to manage setting up all that infrastructure just to let others use the model.
- yousif_123123 1y agoI think at least part of the 10% is if AMD stock reaches 600. Not that I disagree that this looks weird. Why was that needed to be offered? Couldn't they just buy the AMD chips if they're good enough? Or Nvidia is it's better? I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?
- AlanYx 1y ago>Couldn't they just buy the AMD chips if they're good enough? OpenAI would presumably need to raise money to buy the AMD chips. The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI. Then OpenAI will presumably turn around and sell those shares (or borrow against them) to raise enough money to purchase the AMD GPUs.
- rhetocj23 1y agoFinancing made out of thin air. Hilarious
- lesuorac 1y agoNot thin air. Existing AMD shareholders will have their holding diluted. Or assuming banks loan them money, if say OpenAI goes under then the banks just lose that money.
- wmf 1y agoWhen the stock goes from $150 to $600 that's not called dilution. Nobody cares about the number of shares in that situation.
- lesuorac 1y agoThe CEO of Tesla, Elon Musk, was sued over an extremely similar situation. So somebody will care. That said, this is really about the principal. Sure, if I give you $10 and you give me a hamburger it's not like some illegal transaction. But to say the $10 comes from thin air is wrong. It doesn't come from thin air. I would bet that if one day OpenAI decided to sell 10% of AMD the stock would crash from $600 to below $150. IIUC, there's 1.6B shares of AMD while only 54M shares trade daily so dumping 160M shares would tank their price [1]. If AMD gives OpenAI 10% of the company and OpenAI goes under, it's going to take AMD's share price with it. [1]: https://www.marketwatch.com/investing/stock/amd https://www.marketwatch.com/investing/stock/amd
- dagaci 1y agoLol and I had to pay >$60 a share for my little bundle of AMD!
- ralfn 1y agoBecause of the vesting milestones the stock price of AMD would go up by such an extent that creating more s hares would not dilute the share price. Obviously, for the stock price to go up money needs to come from somewhere. It makes sense that this deal would lower the NVidia stock price, so technically it will be NVidia investors waiting too long to respond to this news that will be paying for this. A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't. The rest is just momentum and this would kill that. The real winners will be TSMC and ASML
- j4hdufd8 1y ago> A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't NVIDIA doesn't place transistors in particular configurations. Foundries do that for them. And it is currently common sense that the software is the moat, not the hardware design. Good luck changing the ecosystem to use AMD.
- wqaatwt 1y ago> that the software is the moat, not the hardware design. For inference that’s hardly relevant, though? For training its not exactly insurmountable either.
- dist-epoch 1y ago> I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity. Yes, you are reading it wrong. The big winner here is AMD, not OpenAI. If there is any signal here, it's that AMD is still in the AI game. AMD stock is up 30% on this news.
- boringg 1y agoIts called hedging your risk: making sure Nvidia isn't the only game in town.
- nerdix 1y agoI didn't mean to imply that there was a winner or loser. Just that AMD was subsidizing it's GPUs with equity. I think there are logical reasons for both companies to agree to this deal. AMD is trying to break CUDA dominance. OpenAI is getting extremely cheap compute for expansion and they'd also benefit from the Nvidia monopoly falling if that ever happens.
- orky56 1y agoOpenAI isn't publicly listed so it's hard to tell how this affects them from a "share price" concept. However for a company that's not public and only has capital from financing rounds and revenue, this gives OpenAI a lot more flexibility for the future and hedges risk while maximizing upside.
- iszomer 11mo agoYes. We don't have a sku with OpenAI but we may soon have one and they will be competing with others already in the pipeline. Recall the recent AMD acquisition of ZT Systems' engineering wing and now manufacturing by Sanmina.
- deleted 1y ago[deleted]
- HarHarVeryFunny 1y agoAMD is giving OpenAI warrants (cf options) to buy AMD shares at 1c/share, but these only vest if OpenAI goes thru with AMD purchases as intended. It seems to basically give OpenAI an incentive to go thru with the deal.
- cubefox 1y ago[flagged]
- agentcoops 1y agoI’ve seen a lot of confusion about this type of deal recently: notably, it is often taken to imply something more or less shady is going on. I’m not sure when such arrangements became a thing, but I know equity stakes have long been an important part of enterprise SaaS deals. The reasoning is relatively straight-forward: if a large client commits to a vendor in a way that holds some risk to the former and will materially impact the latter’s business — and especially if the client’s support of said vendor will directly or indirectly benefit their competitors who might also use this vendor — an equity stake is a way to offset risk with upside. You can see this play out in the history of OpenAI. NVIDIA supported them from an early stage and in exchange received OpenAI equity to offset the risk. Now from a position of relative strength, OpenAI has become concerned about vendor lock-in and so is rationally exploring AMD. Yet, because any such deal will materially impact AMD’s stock price and there is risk both of losing time trying to train with new chips as well as of benefiting competitors if they work with AMD to improve their hardware offerings/APIs, it is reasonable to ask for equity upside. So, for the same reasons (increase in stock price and enterprise client who will help improve their product offering) only without risk, is it understandable why AMD would want to offer equity on such favorable terms. TLDR; My sense is that the sudden skepticism towards this relatively common enterprise deal structure seems to derive from the understandable interest in identifying signs of an AI bubble. Such a bubble may (and indeed almost certainly does) exist, but I don’t think this is evidence thereof. ---- EDIT: I'm just clarifying something I saw in a lot of responses. My only point is that it is important to try and empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client. I believe the recent Oracle and NVIDIA deals are cases of (1) that provide evidence of an AI bubble, but that this AMD deal is most likely a case of (2) that provides no further evidence.
- colordrops 1y agoHopefully part of the contract is that OpenAI must make any software frameworks they build to utilize AMD GPUs open source.
- doctorpangloss 1y ago> In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share. Ha ha, OpenAI can afford this because your mom uses a grand total of 7 pieces of software owned by 5 companies, 4 are the largest public companies in the world, and the 5th one is OpenAI.
- acchow 1y ago"Subsidizing" is one way to put it. But these are options not shares. We will discover in a few years that it was actually AMD who is paying OpenAI to take GPUs.
- strangattractor 1y agoMaybe they are using the $100 Billion NVidia investment to pay for this:) If this ship sinks they are all going down together.
- hristov 1y agoIt sure seems that way. The stock options are worth, at the current price of AMD stock, about 32.8 Billion dollars. AMD is giving out these stock options essentially for free in exchange of open ai purchasing chips from AMD. So open ai are getting a 32.8 billion dollars rebate. But on what? Here the press releases are a bit vague. They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money?
- jasonwatkinspdx 1y ago> They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money? MI350 spec sheet says it's 1000 watts typical. So we're talking about something on the scale of a couple million chips.
- mNovak 1y agoI figure these GPUs are typically around 1kW (unclear if 6GW is including overhead like cooling, which might double(?) the power), so in the range of 3-6M GPUs. If these are somewhere in the range of $10-30k (who knows what current or future models are contemplated), that's $30-180B. So clearly the low end doesn't make sense for the 'rebate', but at the high end a ~17% discount doesn't seem unreasonable.
- coliveira 1y agoThis is money from nothing, right? They just found the tree of money.
- doodlebugging 1y agoTo paraphrase Dire Straits - The money from nothing and the chips for free.