Meta and AMD strike $100B deal

Meta Just Made a $100B Bet on AMD

Meta just agreed to buy 6 gigawatts of AI computing power from AMD in a deal worth over $100 billion over the next five years.

As part of the deal, AMD is giving Meta warrants to buy up to 160 million shares at one cent each, potentially equal to 10% of the company if AMD’s stock hits certain milestones, including $600 per share.

AMD closed at $196.

This is not a normal supplier agreement. This is strategic alignment.

Under Tuesday’s agreement, Meta will buy enough of AMD’s latest chips, known as the MI450 series, to power data centers using up to 6 gigawatts of computing power over the next five years. Each gigawatt of computing power means several tens of billions of dollars in revenue for AMD, the company said. Meta is expected to deploy the first gigawatt starting later this year.

Circular Financing gets even more round :-(

Critics are calling these types of deals “circular financing.”

The structure works like this:

Big AI buyer commits to massive chip purchases.
Chip company gives stock or warrants.
Investors reward the chip company for the large order.
Everyone’s incentives become aligned.

AMD did almost the exact same thing with OpenAI (including 10% ownership)

Investors don’t seem to care about the structure. They care about one thing: massive purchase orders.

AMD stock jumped 14% premarket after the announcement.

Meanwhile, Meta Is Going All In

Meta is not slowing down.

Last year it spent $72 billion on AI data centers.

This year it plans to spend up to $135 billion.

Zuckerberg has said Meta plans to deploy tens of gigawatts this decade, and eventually hundreds.

And they’re not just buying Nvidia. They’re buying AMD too.

This is about diversification and leverage. Meta does not want to be dependent on one chip supplier during the biggest computing shift in decades.

The sustainability of that insanely high capex is the subject of another post...

The Real Strategic Shift

Here’s what makes this more interesting.

AMD is not just selling standard GPUs anymore.

The new MI450 chips are built using a “chiplet” architecture, which makes them easier to customize. Meta plans to optimize these specifically for inference.

That moves AMD into more direct competition with Broadcom in custom chip design.

What This Means for Investors

There are three takeaways here:

AI infrastructure spending is still accelerating.
The Nvidia monopoly narrative is weakening. However, Meta did announce last week that they would buy several milllion of NVDA's GPUs as well.
Circular financing is still in play + could be the catalyst for an AI crash (in my opinion)

Meta is taking huge bets to deploy capital and hopefully build long term AI dominance.

AMD is using financial engineering to secure demand.

Investors are rewarding anyone who locks in massive compute contracts... for better or for worse.