Meta Strikes Monumental $100 Billion AI Chip Deal with AMD
In a landmark agreement announced on Tuesday, Meta has committed to a multiyear deal to acquire up to six gigawatts of artificial intelligence computing power from Advanced Micro Devices (AMD). The arrangement, valued at more than $100 billion (£74.5 billion), represents one of the largest technology partnerships in recent history and could see Meta take a stake of up to 10 percent in the US chip giant.
Unprecedented Scale and Strategic Warrants
The companies revealed that Meta will purchase massive volumes of AMD's latest graphics processing units (GPUs) and AI central processing units (CPUs) to fuel a new generation of data centers. Shipments are expected to commence later this year, with the first gigawatt of capacity projected for utilization in the second half of 2026.
To put this into perspective, six gigawatts of AI compute capacity equates to enough electricity to power over five million homes, underscoring the colossal scale of Meta's infrastructure expansion. As part of the announcement, AMD granted Meta performance-based warrants to acquire up to 160 million AMD shares at a nominal price of $0.01 each. The final tranche would vest only if AMD's stock reaches $600.
Following the news, AMD shares surged approximately seven percent at the US market open on Tuesday, while Nvidia's stock experienced a slight decline.
Challenging Nvidia's AI Supremacy
This agreement marks a significant victory for AMD Chief Executive Lisa Su as she aims to challenge Nvidia's formidable grip on the AI chip market. Nvidia is widely estimated to control about 90 percent of the market for GPUs used in AI training and inference, recently becoming the world's most valuable publicly traded company with a market capitalization exceeding $4.6 trillion late last year.
Although Nvidia has long counted Meta among its largest customers—announcing a "multigenerational" agreement last week for data centers powered by millions of Nvidia chips—this new deal signals Meta's strategic diversification.
Meta's Massive AI Investment Drive
Meta has disclosed plans to spend up to $135 billion on capital expenditure this year, a substantial increase from $72 billion last year, as it scales its AI infrastructure. Founder and CEO Mark Zuckerberg stated the company intends to deploy "tens of gigawatts" of compute this decade and "hundreds of gigawatts or more over time."
"This is an important step for Meta as we diversify our compute," Zuckerberg remarked in a statement. "I expect AMD to be an important partner for many years to come."
Lisa Su emphasized that the agreement positions AMD "at the center of the global AI buildout," delivering "high-performance, energy-efficient infrastructure optimised for Meta's workloads."
Custom Chips and Circular Financing Structures
The Meta agreement represents one of the initial instances of AMD supplying custom AI chips designed for a specific customer's workloads. The series employs a modular "chiplet" architecture, facilitating tailored performance for particular tasks.
The deal's structure mirrors a comparable pact AMD established with OpenAI in October, which also included warrants for up to 160 million AMD shares tied to purchase volumes and share price targets. Some critics have characterized these arrangements as a form of "circular financing," where equity incentives are linked to enormous investments.
With a limited pool of hyperscale customers capable of purchasing chips in such volumes, both AMD and Nvidia have utilized long-term supply agreements and equity incentives to secure demand.
"Meta is in a unique position to control the full stack and they can use whoever's compute they want," observed Ben Bajarin of Creative Strategies. "Deals will be done across the board."
Investor Scrutiny and Financial Implications
The announcement emerges amid increasing investor scrutiny over the scale of AI spending by Big Tech firms. Despite concerns about capital intensity, Meta recently attributed record quarterly revenue to AI-driven enhancements.
AMD reported fourth-quarter sales growth of 34 percent to $10.27 billion, while Nvidia is anticipated to announce revenue growth of approximately 68 percent year-on-year when it releases results this week. For AMD, valued at roughly $320 billion, the Meta deal signifies a pivotal step in its quest to become a credible alternative to Nvidia in AI infrastructure.
