What is the story about?
Meta Platforms, the parent company of Facebook, has announced its intention to purchase artificial intelligence chips from Advanced Micro Devices (AMD)
in a deal that may be valued at over $100 billion. The agreement involves the acquisition of AMD's MI450 chips to enhance the capabilities of Meta's data centers, with shipments expected to commence in the latter half of this year as part of a 6-gigawatt initiative.
Stock Market Reaction
Following the announcement, AMD's shares surged by more than 9% before the market opened on Tuesday.Performance-Based Warrant
As part of the deal, AMD has granted Meta a performance-based warrant for up to 160 million shares of its common stock, priced at $0.01 each. This warrant will vest contingent on the achievement of specified milestones.The initial tranche will vest with the first gigawatt of shipments, with subsequent tranches tied to an increase in Meta’s purchases scaling up to 6 gigawatts.
Recent Partnerships
This development follows Meta's recent announcement of a long-term partnership with Nvidia, where it will utilize millions of chips and other technologies from Nvidia for its AI data centers.AMD's Competitive Landscape
AMD aims to compete with Nvidia amid a surge in demand for AI technologies, which many analysts regard as a significant shift in the tech industry, comparable to the introduction of the iPhone by Apple co-founder Steve Jobs.Nvidia has established an early advantage by adapting its graphics processing units (GPUs) for AI applications, which has led to increased demand from tech companies seeking to develop and run AI systems.
