Lisa Su Is Giving AMD’s Biggest A.I. Customers a Stake in the Company - Observer

AMD is transforming its business model by offering major AI customers a potential ownership stake in the company. CEO Lisa Su announced that both Meta and OpenAI received warrants to purchase up to 160 million shares each, subject to certain conditions. This strategic move comes as AMD's data-center revenue has nearly doubled year-over-year, reaching $8.5 billion in the third quarter, accounting for nearly two-thirds of the company's total revenue.

The chipmaker's overall revenue reached $13.4 billion in Q3, up 45 percent year-over-year, exceeding the high end of its guidance. The data-center segment's operating margin improved significantly, rising to 34 percent from 25 percent a year earlier. Across AMD, the gross margin was 54 percent under generally accepted accounting principles.

Strategic partnerships

AMD's multiyear agreement with Meta covers up to six gigawatts of GPUs, while the company has also invested $1 billion in Meta's October equity offering. Similarly, AMD invested $2.5 billion in Anthropic's recent IPO filing, contingent on the offering closing. This investment counts toward AMD's existing commitment to invest up to $5 billion in the AI developer, reducing the remaining commitment dollar for dollar.

These partnerships extend beyond financial ties. Major tech companies including Anthropic, OpenAI, Meta, Microsoft, and Oracle Cloud Infrastructure are running models on AMD's Helios rack-scale systems built around Instinct MI450 Series GPUs and EPYC CPUs. While these initial deployments are active, the customers' full multiyear buildouts are not yet complete.

Su described AMD as a "data center first company" in a recent interview, acknowledging that the company currently has more demand than it can supply. Her solution involves forward planning, with AMD investing in research and development, supply-chain capacity, and infrastructure alongside commercial partners years in advance.

Market challenges

Despite AMD's growth in the data-center segment, its client and gaming segment reached $3.7 billion in revenue, down 8 percent year-over-year. Gaming revenue fell significantly, dropping 40 percent to $773 million due to lower semi-custom and graphics revenue, while client revenue rose 7 percent to $2.9 billion driven by Ryzen mobile processor sales.

For customers deploying AMD's hardware, infrastructure costs and setup time present significant hurdles. Even AMD's older Instinct MI325X accelerator has a specified peak board power of 1,000 watts, requiring power upgrades and advanced cooling solutions. Software compatibility also adds expenses, as buyers switching from Nvidia's systems may need dedicated engineering hours for the transition, though recent software updates have lessened this burden.

AMD plans to increase supply in 2027 across its CPU and GPU offerings, working with supply-chain partners to secure memory and other components. On Nov. 10, the company announced that sixth-generation EPYC server platforms were generally available and shipping from server vendors. Meanwhile, AMD's key competitor Nvidia is dealing with its own challenges, as its board investigates reports that CEO Jensen Huang was targeted by a foreign intelligence effort, though it expressed confidence in Huang and his leadership team.