AMDs

The deal also gives the ChatGPT creator the option to buy upto 10 percent of AMD.

United States chipmaker AMD will supply artificial intelligence chips to OpenAI in a multi-year deal that would bring in tens of billions of dollars in annual revenue and give the ChatGPT creator the option to buy up to roughly 10 percent of the company.

Shares of the chipmaker surged more than 34 percent on Monday when the deal was announced, putting them on track for their biggest one-day gain in more than nine years and adding roughly $80bn to the company’s market value.

The deal, latest in a string of investment commitments, underscores OpenAI and the broader AI industry’s voracious appetite for computing power as companies race towards developing AI technology that meets or exceeds human intelligence.

“We view this deal as certainly transformative, not just for AMD, but for the dynamics of the industry,” AMD executive vice president Forrest Norrod told the Reuters news agency.

Deal helps ‘validate technology’

The agreement closely ties the startup at the centre of the AI boom to AMD, one of the strongest rivals of Nvidia, which recently agreed to make substantial investments in OpenAI.

Analysts said it was a significant vote of confidence in AMD’s AI chips and software but is unlikely to dent Nvidia’s dominance, as the market leader continues to sell every AI chip it can make.

AMD executives expect the deal to net tens of billions of dollars in annual revenue. Because of the ripple affect of the agreement, AMD expects to receive more than $100bn in new revenue over four years from OpenAI and other customers, they said.

The chipmaker is expected to report revenue of $32.78bn this year, according to LSEG data. In contrast, analysts are expecting Nvidia to report revenue of $206.26bn for the current fiscal year.

“AMD has really trailed Nvidia for quite some time. So I think it helps validate their technology,” said Leah Bennett, chief investment strategist at Concurrent Asset Management.

Shares of Nvidia dipped more than 1 percent.

OpenAI CEO Sam Altman said the AMD deal will help his startup build enough AI infrastructure to meet its needs.

It was not immediately clear how OpenAI would fund the enormous deal.

OpenAI, which is valued at $500bn, generated approximately $4.3bn in revenue in the first half of 2025 and burned through $2.5bn in cash, according to media reports.

In September, Nvidia announced a deal to supply OpenAI with at least 10 gigawatts worth of its systems.

In contrast with the startup’s deal with AMD where it will take a stake in the chipmaker, Nvidia will invest $100bn in the ChatGPT parent under the terms of the agreement announced in September.

Taking a stake in AMD could give OpenAI “the power to potentially influence corporate strategy. With Nvidia, OpenAI is simply the client and not a part-owner,” said Dan Coatsworth, head of markets at A J Bell.

OpenAI has worked with AMD for years, providing inputs on the design of older generations of AI chips.

The startup and its main backer, Microsoft, announced last month that they had signed a non-binding agreement to restructure OpenAI in to a for-profit entity.

A person familiar with the matter said the deal with AMD does not change any of OpenAI’s ongoing compute plans, including that effort or its partnership with Microsoft.

Advanced Micro Devices (AMD -0.23%) hasn’t had the best few years. It has been outshined by its rival Nvidia (NVDA 0.34%) in the biggest computing buildout of all time, and there doesn’t appear to be a path where AMD can be a direct competitor with Nvidia. Instead, it’s only viewed as an alternative so customers can push back against Nvidia if it gets too aggressive with pricing.

Furthermore, AI hyperscalers are starting to design their own chips in collaboration with Broadcom, creating another fierce competitor for AMD. Alongside all of that, AMD isn’t completely focused on high-powered graphics processing units (GPUs). It also has an embedded processor division as well as other computing chips used in gaming consoles and PCs.

All of this creates a company that is more diversified than its peers. However, diversification isn’t always a good thing, especially when one division is experiencing a generational growth opportunity.

So, what will AMD’s stock price be by 2030? Let’s take a look.

Image source: Getty Images.

AMD is a more diversified business than Nvidia

AMD splits its business into three primary divisions: data center, client and gaming, and embedded.

Data center isn’t AMD’s largest division by revenue; Client and gaming is by a slim margin. In Q2, data center revenue was $3.24 billion versus client and gaming’s $3.62 billion. However, AMD’s data center divisions were heavily affected by the ban on selling computing hardware to China, which also affected Nvidia.

When comparing Nvidia and AMD’s data center growth, it’s quite heavily favored in one direction. AMD’s data center revenue increased by 14% year over year in Q2, while Nvidia’s rose by 56%. This clearly indicates that AMD is getting smoked by Nvidia, and doesn’t really have a chance to catch up.

Most AI hyperscalers have already built a ton of infrastructure using Nvidia’s technology, and when these GPUs eventually burn out, it would cost a significant amount more to switch over to AMD’s architecture versus staying with Nvidia’s. As a result, AMD is stuck in second place.

To make matters worse for AMD, its embedded and client and gaming divisions do not have significant long-term potential. These are divisions that over the long term won’t grow much more than 10% annually, making them essentially market performers.

This doesn’t bode well for AMD, especially with its already expensive valuation.

AMD’s expensive stock price is holding its long-term potential back

Despite AMD clearly being a second-place company, it’s actually more expensive than its peer.

NVDA PE Ratio (Forward) data by YCharts

AMD’s 41 times forward earnings price tag isn’t cheap, and I’m not sure its growth justifies it. In 2025 and 2026, Wall Street analysts project 28% and 22% revenue growth, respectively. There are plenty of companies that are expected to grow near that level over the next few years that don’t have nearly the premium that AMD does, so this also works against it.

However, that’s not the only way for a company to perform. AMD is also working on improving its margins, something that it has done consistently over the past few years.

AMD Profit Margin data by YCharts

If AMD can improve its margins to 15% by 2030, it could be a winning investment. If AMD trades at a more reasonable valuation of 30 times forward earnings, grows at a 20% pace, and achieves that margin level, it could be worth about $225 per share.

However, that’s only a 40% upside from today’s stock price. I think there are a lot better stocks to invest in than AMD, as it doesn’t have the growth that others in its industry have. Furthermore, if the AI market goes down, it will drag AMD’s stock with it. It may not decline as much as Nvidia’s, but it would still result in hefty losses. There are far better alternatives to invest in than AMD, and I think investors would be better off picking those stocks instead.