Most people have probably noticed the AMD-Open AI deal, as the shares have seen a significant jump in price in recent weeks. But is that all there is to it? Or does this agreement perhaps show us much more clearly where AMD is heading in the future?
The deal is quite remarkable: $AMD (-0.28%) AMD will supply up to 6 gigawatts of AI computing power to OpenAI over several years, based on the new Instinct MI450 chips designed specifically for AI applications. In return, OpenAI gets the opportunity to acquire up to 10 percent of AMD, but only under certain conditions.
These 10% share options reveal a lot about the long-term strategy of both companies. In order to be allowed to exercise them at all, OpenAI must achieve several milestones, including investment commitments, delivery targets and a share price target of 600 US dollars. Only when this price is reached can OpenAI exercise its option.
Assuming that these agreements materialize as planned, a simple but meaningful valuation model can be constructed:
With a target price of 600 dollars, AMD would have a market capitalization of around 970 billion US dollars , which is still still more than double (140%) the current level from the current level (approx. 250 dollars). Taking into account the potential dilution from the 10% additional shares, the theoretical target price would be around 545-550 dollars. That would still be an increase of 118 percent compared to the current level.
AMD is also interesting as an investment for the next few years for many other reasons apart from the deal.
With its focus on inference, i.e. the execution of AI models, AMD differs significantly from NVIDIA, which focuses more on training new models. The market for inference is even estimated to be larger in the long term because AI programs such as ChatGPT, Copilot or image generators run millions of times every day, while training only happens once.
Added to this is AMD's work on edge AI chips, i.e. chips that execute AI directly on the end device, such as smartphones, laptops or household appliances. This area is likely to grow strongly in the coming years, as more and more applications will be processed locally instead of in the cloud.
I recommend everyone to look into AMD for themselves and check the investment thesis to see whether it fits into their own portfolio. Even after such a sharp rise in the share price, opportunities could continue to arise, but the path towards a market capitalization of USD 1 trillion is likely to be volatile.
By the way, this is my first post. I just wanted to give it a try and plan to share my thoughts on exciting stocks here in future. Together with my own valuation models, sometimes simpler (like today), sometimes a little more detailed.
I'm curious to see how you see AMD and what your opinion is on the current development.
Source: https://www.zeit.de/wirtschaft/2025-10/usa-amd-openai-ki-chips-verkauf-deal
