AMD clinches maga chip supply deal with Meta

Advanced Micro Devices (AMD) announced a deal on Tuesday to sell up to $60 billion worth of artificial intelligence (AI) chips to Meta Platforms over five years, in which it allows the Facebook owner to purchase as much as 10% of the chip firm.

As AI chip demand surges, competition has intensified, with companies like Nvidia and Alphabet securing major deals for scarce supply.

Last year, AMD signed a similar deal with OpenAI, which was hailed as a vote of confidence in its chips and software, significantly boosting its stock price, while Meta separately made a deal with Nvidia for AI chips.

"Meta is diversifying its chip suppliers to avoid bottlenecks in its AI goals," said Matt Britzman, an analyst at Hargreaves Lansdown. "For AMD, this is a vote of confidence, but giving up a 10% stake suggests struggles with organic demand."

Return of circular deals

The partnership also highlights the deepening ties among AI industry AI industry leaders, amidst concerns over the rise of circular deals.

Meta and OpenAI are set to own a stake in one of their most significant suppliers while Nvidia is eyeing investments in some of its largest customers, including the ChatGPT parent.

AMD will supply six gigawatts' worth of chips to Meta, starting with one gigawatt of the company's forthcoming MI450 flagship hardware in the second half of this year, AMD CEO Lisa Su told a news briefing.

One gigawatt is enough to power roughly about 750,000 homes on average.

Meta's deal with AMD comes only days after the company led by Mark Zuckerberg said it had agreed to deploy millions of processors over the next few years from AMD rival Nvidia.

Last October, Alphabet agreed to supply Anthropic with custom chips it had long reserved for in-house use in a deal worth tens of billions of dollars.

Investor worries about the AI market also extend to the long wait for significant payoffs from Big Tech's relentless spending to expand data center infrastructure.

The five largest U.S. cloud and AI infrastructure providers – Microsoft, Alphabet, Amazon, Meta, and Oracle – have collectively committed to spending more than $650 billion on capital expenditure in 2026, nearly doubling 2025 levels.

Meta bets on custom processors

In addition to AMD's flagship graphics chips, Meta also plans to buy central processors, including a variant that will be customized for the social media platform's needs.

The custom CPU will balance performance with energy efficiency. The deal will include two generations of AMD's CPUs.

Meta helped contribute to the MI450 design that is optimized for a computing process known as inference, which is when a chatbot such as OpenAI's ChatGPT responds to a user's queries. The chip will compete with Nvidia's next-generation Vera Rubin processor.

Industry analysts expect the market for inference hardware to dwarf the size of the market for the equipment needed to build the large models AI runs on.

As part of the agreement, AMD will issue a warrant for 160 million shares with an exercise price of one cent.

The warrant will vest over the course of the deal and will do so after AMD stock price hits rising performance targets up to $600. In addition to the stock price targets, there are "technical and commercial considerations" for each tranche of the warrant that Meta needs to fulfill.

Meta will continue to buy chips from other vendors and develop its own processors, with plans to use multiple chipmakers to meet its expansive data center needs.

Sources have said that Meta has been in talks with Google about using its tensor processors for AI work.

(With input from agencies)