Meta strikes AMD chip deal as AI spend continues to boom
Meta has agreed a multiyear deal to buy up to six gigawatts of AI computing power from AMD, in an agreement valued at more than $100bn (£74.5bn) that could see the social media group take a stake of up to 10 per cent in the US chip giant.
The companies said on Tuesday that Meta would purchase large volumes of AMD’s latest GPUs and AI CPUs to power a new wave of data centres.
They said they expect shipments to begin later this year, and the first gigawatt of capacity to be used within the second half of 2026.
Six gigawatts of AI compute capacity is equivalent to enough electricity to power more than five million homes, which shows just how huge the scale of Meta’s infrastructure build-out is.
In the announcement, AMD granted Meta performance-based warrants to acquire up to 160 million AMD shares, roughly 10 per cent of the company, at a nominal price of $0.01 each. The final tranche would vest only if AMD’s stock reaches $600.
AMD shares rose around seven per cent at US market open on Tuesday, while Nvidia’s stock slipped slightly.
Challenging Nvidia’s dominance
The deal is a huge win for AMD chief executive Lisa Su, as she looks to challenge Nvidia’s grip on the AI chip market.
Nvidia is widely estimated to control around 90 per cent of the market for GPUs used in AI training and inference and, has become the world’s most valuable publicly traded company.
It reached a market capitalisation of more than $4.6tn late last year.
Nvidia has long counted Meta among its largest customers and last week announced a “multigenerational” agreement, under which the Mark Zuckerberg-owned firm will build data centres powered by millions of Nvidia’s chips.
Meta has said it plans to spend up to $135bn on capital expenditure this year, up from $72bn last year, as it scales its AI infrastructure.
Zuckerberg has said the company intends to deploy “tens of gigawatts” of compute this decade and “hundreds of gigawatts or more over time”.
“This is an important step for Meta as we diversify our compute,” he said in a statement. “I expect AMD to be an important partner for many years to come”
Lisa Su said the agreement places AMD “at the center of the global AI buildout”, adding that the company is delivering “high-performance, energy-efficient infrastructure optimised for Meta’s workloads”.
‘Circular’ structures
The Meta agreement is one of the first examples of AMD supplying custom AI chips designed for a specific customer’s workloads.
The series uses a modular so-called ‘chiplet’ architecture, that supposedly makes it easier to tailor performance for specific tasks.
The structure of the deal mirrors a comparable pact AMD struck with OpenAI in October, which also included warrants for up to 160 million AMD shares tied to purchase volumes and share price targets.
These talks have been described by some critics as a form of “circular financing”, in which equity incentives are linked to huge investments.
With a limited pool of hyperscale customers able to buy chips in such volumes, both AMD and Nvidia have used long-term supply agreements and equity incentives to secure demand.
“Meta is in a unique position to control the full stack and they can use whoever’s compute they want,” said Ben Bajarin of Creative Strategies. “Deals will be done across the board.”
The announcement comes amid growing investor scrutiny over the scale of AI spending by Big Tech, but despite concerns about capital intensity, Meta recently attributed record quarterly revenue to AI-driven improvements.
AMD reported fourth-quarter sales growth of 34 per cent to $10.27bn, while Nvidia is expected to report revenue growth of around 68 per cent year-on-year when it publishes results this week.
For AMD, valued at roughly $320bn, the Meta deal marks a step change in its bid to become a credible alternative to Nvidia in AI infrastructure.