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This $100bn deal didn't cost anything and isn't worth anything. Remember back two weeks ago when Nvidia gave OpenAI $100bn so they can keep buying Nvidia GPUs? This is AMD trying to do the same, but they don't have $100bn so they are offering OpenAI share options to buy GPUs.

The share options will be worth at least $100bn too, if the conditions are met. But meeting the conditions will require buying huge numbers of GPUs from AMD. GPUs worth $100bn, and somewhere to put them. OpenAI can't afford that - not even close.

So they need to raise financing. On the face of it, the options seem to mean that lending OpenAI the money to buy the GPUs is perfectly safe. You take the stock options as collateral. You lend the money, OpenAI buy the GPUs, the AMD stock goes up, the option conditions are met, and even if OpenAI didn't pay you back the options will let you recover your investment.

However, this loan is far less safe than it first appears. The problem is that although lending the money allows openAI to buy GPUs, this doesn't necessarily cause AMD stock to rise. Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down. And you'll be left with worthless collateral and a big loan to a company which can't afford to pay it back. So they haven't actually magically created financing at all. They just created the illusion of it. It's very clever. But it's fake. The real announcement will be when or if someone lends OpenAI cash.

It seems that these American companies have decided, with the government blessing, to form a cartel to split the imaginary money they assume will exist for AI technologies. This is an extremely disturbing notion that will only increase the combined power of these tech companies over our daily lives, but may also spell the doom of the economy in a not-so-distant future.

Fully anecdotal, but nearly every knowledge worker I know has Copilot or ChatGPT or some kind of corporate LLM subscription included in their job now. I don’t think the majority use it very well, but I know at least a handful who do.

Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.

> Corporate America seems ready to spend real money on AI, at least for now. This money being spent today doesn’t come close to recouping the investment OpenAI et al have made, but the trickle’s begun. The money’s not all imaginary.

It's still pretty funny money. Companies are buying those subscriptions to show their shareholders how trendy they are, not because they're useful to them. And the subscription price points are widely speculated to not even have positive gross margin, yet alone starting to recoup any investment. It's far from clear that there's any kind of viable business here.

Back in the dotcom boom years, Internet adoption growth was real - with a lot of people and businesses paying real money to get online. And yet, the dotcom bust happened. The existence of paying customers adopting a technology does not assure the sustainability of the industry at any point in time.

i dont see dotcom technologies replacing droves of workers and creating panics in /r/screenwriters, /r/3dmodelers etc. The displacement is real and we are not going back. Dotcom tech created fake problems so their 'advance technology solution' can be presented as solution. With AI wave, it's the opposite - business heads are actually thinking 'what other real problems can i solve with AI'. OpenAi and Claude don't even have to do any preaching. That's real value.

I was told that - with the full complement of good tools for a scrum team- the cost approaches a 6th member of the team. The crap from MS/GH plus a decent agent like Claude/Bedrock. You can squeeze decent behavior from vscode agent if you know what you are doing, but anyone who knows what they are doing wishes they had something better.

That isn't true for our team. It's more like the cost of coffee/tea/energy drinks for our team.

I am personally paying $200/month for the ChatGPT pro version. It’s the best investment I’ve made in my career in a long time. It’s like having 2-3 direct reports. The alternatives provided by my companies are too slow and aren’t anywhere as good. If people start using it anywhere near how I’m using it, there will be profound changes to the workplace in the coming 3 years.

But also under the assumption that the taxpayers will bail them out and foot the bill when things go wrong. Privatize the gains, socialize the losses. This is completely on the assumption that the US government would be able to do this, despite the bond market, inflation, debt that would constrain any response.

Does anyone here who lived through the dotcom bubble feel like we're in a similar situation with AI? I am excited about AI and recognize its potential. However, the increasing number of business deals like this one is raising my concerns that we may be heading toward a harsh bubble.

if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down.

Nah, nothing in the current market is based on fundamentals.

>> Nah, nothing in the current market is based on fundamentals.

Sure it is. Stock prices are based on supply and demand. Oh, did you mean company fundamentals? Hmm.

BTW that demand is all coming from 401k contributions. The powers that be are terrified of a downturn causing too many job losses tanking the whole thing.

> stock price, and AMD's will go down

stonks goes up

This depends significantly on the real cost of the gpu. The cost of enterprise ai GPUs is likely 2 orders of magnitude lower than the current list price. These deals avoid the need to markdown the price of the hardware to gain volume.

If I understand the math correctly. Amd could offer the GPUs at around a 20x discount to OpenAI on a deal worth 10-20 billion and be profitable on both amortized R&D and Cost of Goods sold.

It's probably closer to 5x (80% gross margin) than 20x.

It's fundamentally a leap of faith that AI will work out. The entirety of OAI is exactly that - a triple bet the farm on AI.

Whether this works out or not no longer depends on the specifics of the deals. This either works big picture or it's all a smoking crater

it kinda worked in a way. AMD offered OpenAI 160 million stock options.

With AMD's stock jump today it's net worth increased about $35billion, close enough in value to those stocks option they gave away (if it was redeemed instantly).

It's too much of a coincidence so I'm guessing market makers and institutional shareholders priced it in their trading today.

If a company gave away some portion of is assets, shouldn't its market cap go _down_ by that amount not up? That's how stocks trade ex dividend e.g.

You assume the market is in any way rational...

> > Infact if OpenAI don't find a profitable use for them then both their stock price, and AMD's will go down.

In theory yes but OpenAI doesn't have a stock and in the word of AntiChrist Peter Thiel : "We only have AI, there is nothing else out there except for AI" so with the belief still strong to carry at least up until GPT 7 OpenAI will find ways to present itself to the world as capable of putting to use the AMD GPUs and AMD will benefit from it.

And honestly the anti Christ is right. Vibe coding is already bigger than self driving cars, the metaverse and all that stuff that emerged during covid

Imagine if the answer to the Fermi paradox ends up being not "they destroyed themselves through war" but "they destroyed themselves trying to find meaning in money and fake thinking machines".

The title didn't make this obvious (at least not to me) but it's OpenAI that has the option to buy 10% of AMD. Not the other way around.

In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share.

I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity.

AMD is giving OpenAI warrants (cf options) to buy AMD shares at 1c/share, but these only vest if OpenAI goes thru with AMD purchases as intended.

It seems to basically give OpenAI an incentive to go thru with the deal.

The stock popped quite a bit today, so investors seem to think this is a good deal for AMD. I tend to agree, may finally enable AMD to get a foot in the door in the whole large scale AI market.

AMD cards are good for inference or new low-level stuff anyway and more cost-effective. it's a good deal for everyone.

AMD has great hardware, but its software still leaves a lot to be desired for AMD to be a major AI hardware player. It takes years of unwavering leadership focus and hundreds of millions (probably billions) of dollars to get the software that works well for AI users.

The role the software played to get NVIDIA from a run-of-the-mill video card manufacturer to the top dog in AI hardware with 4T market cap is often underappreciated. My 2c.

> AMD has great hardware, but its software still leaves a lot to be desired for AMD to be a major AI hardware player. It takes years of unwavering leadership focus and hundreds of millions (probably billions) of dollars to get the software that works well for AI users.

It does but they have a capable CEO with a vision and broad support from the board - Ryzen was a decade long over night success.

I'm in no position to judge the current CEO, but the Zen credit goes to

- Rory Read, under whom the program started

- Jim Keller who ran the program

- the engineers and managers who put the sweat in

- and, one must never forget, a rotating cast of executives and board members at Intel

Zen is a success. But Zen is hardware, and AMD is (historically) a hardware company. Delivering software is hard, even if you're a software company. I wouldn't take it as given that a good (hardware) CEO, vision, and board support are sufficient to build the required software organisation, especially given their track record on this front to date. It is more likely that Modular is AMD's software savior. I won't speculate on how probable that is.

AMD being able to benefit from AI, and this OpenAI relationship, is a bit different though. This is about using AMD hardware for training and presumably inference of LLMs. The users will be people consuming OpenAI APIs and services running on AMD hardware, not people themselves writing custom ML applications using AMD libraries.

Maybe also worth noting that some of the worlds largest supercomputers (e.g. Oak Ridge "Frontier" exascale computer) are based on AMD AI processors - I've no idea what drivers/libraries are being used to program these, but presumably they are reliable. I doubt they are using CUDA compatibility libraries.

Can someone with banking / deal-making experience explain to me how this warrant works? My point: If OpenAI exercises the warrant and buys 10% of AMD for 1 penny per share, where does AMD get the shares? Or will they do a secondary offering and dilute existing shares? Or do they take from treasury holdings (of shares)? Or does AMD coordinate a buyback of shares, then deliver to OpenAI?

Straight dilution

[dead]

I’ve seen a lot of confusion about this type of deal recently: notably, it is often taken to imply something more or less shady is going on. I’m not sure when such arrangements became a thing, but I know equity stakes have long been an important part of enterprise SaaS deals. The reasoning is relatively straight-forward: if a large client commits to a vendor in a way that holds some risk to the former and will materially impact the latter’s business — and especially if the client’s support of said vendor will directly or indirectly benefit their competitors who might also use this vendor — an equity stake is a way to offset risk with upside.

You can see this play out in the history of OpenAI. NVIDIA supported them from an early stage and in exchange received OpenAI equity to offset the risk. Now from a position of relative strength, OpenAI has become concerned about vendor lock-in and so is rationally exploring AMD. Yet, because any such deal will materially impact AMD’s stock price and there is risk both of losing time trying to train with new chips as well as of benefiting competitors if they work with AMD to improve their hardware offerings/APIs, it is reasonable to ask for equity upside. So, for the same reasons (increase in stock price and enterprise client who will help improve their product offering) only without risk, is it understandable why AMD would want to offer equity on such favorable terms.

TLDR; My sense is that the sudden skepticism towards this relatively common enterprise deal structure seems to derive from the understandable interest in identifying signs of an AI bubble. Such a bubble may (and indeed almost certainly does) exist, but I don’t think this is evidence thereof.

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EDIT: I'm just clarifying something I saw in a lot of responses. My only point is that it is important to try and empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client.

I believe the recent Oracle and NVIDIA deals are cases of (1) that provide evidence of an AI bubble, but that this AMD deal is most likely a case of (2) that provides no further evidence.

I generally agree with your point. OpenAI committing to buying a bunch of AMD hardware and doing the work to integrate support for it in their systems is a risk for OpenAI and a benefit for AMD (as demonstrated by the AMD stock popping on the announcement). So the warrants give OpenAI equity upside to offset risk.

I think the skepticism comes from the recent OpenAI/Oracle deal which seemed kind of circular due to paying with equity whose value was being inflated by the deal itself (if I understand it correctly). This deal seems more like an outright gift of equity if OpenAI goes through with the deal - so it could be thought of as almost a rebate or net discount on the cost of the GPUs.

Completely agreed. I note in a comment below that my only aim is to distinguish between deals that provide new evidence of a bubble and those that do not provide any further evidence towards that conclusion. I think the Oracle and especially the recent NVIDIA deals provide such evidence, while this AMD deal does not.

As @stingraycharles notes above, the AMD stock went up a lot already and this "may finally enable AMD to get a foot in the door in the whole large scale AI market."

I think the skepticism is mostly aimed towards OpenAI making commitments to spend copious amounts of money, rather than the options that AMD is offering which makes sense.

It's called Channel Stuffing and was always at least a red flag.

The skepticism is not sudden. Various kinds of circular deals were common in 1999/2000, shortly before the bubble burst, when telecom equipment makers subsidized their customers in order to prop up sales.

I understand that. I simply think there's some importance in at least trying to empirically tease out what represents: (1) a circular deal in which vendors facing the limits of growth are subsidizing vulnerable clients; versus (2) a risk-hedging deal in which a non-market leading vendor offers upside to a market leading client.

Again, I'm in no way denying either that (1) exists or that there's almost certainly an AI bubble -- I just think this difference is material.

For example, I would classify the recently proposed deal between NVIDIA and OpenAI as a case of (1), but this deal between AMD and OpenAI as (2). Namely, because I think it's clear that the chips act as well as recent advancements by Chinese manufacturers are threatening to NVIDIA's market-leading position and OpenAI investigating new vendors suggests they have suddenly become concerned with reducing cost of goods. Indeed, if both the leading Chinese firms and OpenAI were shown to be able to work with other vendors without sacrificing speed to market it would materially impact NVIDIA's stock price. AMD, on the other hand, is not trying to subsidize an existing client, but convince a market leader to take a risk.

The NVIDIA deal, then, suggests to me that certain limits have been reached in the industry, while the AMD deal does not provide me with any further evidence as to the existence of a bubble.

Your way of spelling "through" makes a lot more sense.

I think at least part of the 10% is if AMD stock reaches 600.

Not that I disagree that this looks weird. Why was that needed to be offered? Couldn't they just buy the AMD chips if they're good enough? Or Nvidia is it's better?

I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?

>Couldn't they just buy the AMD chips if they're good enough?

OpenAI would presumably need to raise money to buy the AMD chips.

The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI. Then OpenAI will presumably turn around and sell those shares (or borrow against them) to raise enough money to purchase the AMD GPUs.

> The "genius" of this deal is that AMD is "giving away" 10% of the company (at $0.01/share) to OpenAI.

There's no giving away of anything in the deal. The $0.01 per share price is only available if they purchase the GPUs.

It's more like one of those "free with purchase" deals where you're still paying for the product, but they throw in something to sweeten the deal.

They're not actually getting AMD shares at $0.01 each with no strings attached like many of the comments are assuming.

They sign the purchase order on 1/1/26. AMD issues invoice to be paid in 30 days, that is 2/1/26. OpenAI triggers warrant and informs AMD on 1/2/26. OpenAI receives shares on 1/4/26. On 1/5/26 OpenAI and AMD announce the GPU purchase deal. On 1/30/26 OpenAI sells its shares in AMD. From proceeds, OpenAI pays AMD on 2/1/26. Thus, AMD financed OpenAI's GPU purchase via AMD's shares.

translated, AMD buys GPU from itself and gives them to OpenAI for free. OpenAI gets GPUs for free, AMD hopes the market will reward the deal enough to increase its valuation by more than the dilution cost.

I have to ask - is this even legal? I understand it can be, but somehow it feels wrong. I guess AMD would report revenue of those GPU sale and equity issuance / dilution as part of payment terms, and OpenAI would record hardware purchase expense as well as investment income or maybe capital gain when selling those shares. What makes it legal is probably it all needs to be transparently communicated in time?

The rest of the world trying to decipher this post because of the date format :headscratch:

Yes, I was being somewhat flippant in my description of the transaction. But the net result of the transaction is the same. OpenAI can finance the GPU purchases by borrowing against the contractual guarantees it received from AMD to receive warrants in exchange for acquiring AMD GPUs. Whether the transaction is partially or entirely financed will depend on AMD's share price movement in the interim.

It's just round tripping with an extra step or two. AMD giving OpenAI money (via stock options) that they can use to buy AMD chips.

That “just” is doing a lot of work equivocating stock options with money.

If that were true, there would never be any business that failed.

It's circular money flows.

Two circular flows now. Nvidia Oracle and OpenAI, and now this loop with OpenAI and AMD.

This really isn't the sign of a healthy economy.

These are options with a 99.995% discount (as of this writing) on AMD stock.

It seems to me that there is an aspect of marketing to this deal. Nvidia has the mindshare, so this would help legitimise AMD offerings. This is almost product placement/sponsorship for AMD.

Also, this would battle test AMD's platform and provide enhancements so it's also a beta-testing service.

Financing made out of thin air. Hilarious

Not thin air.

Existing AMD shareholders will have their holding diluted.

Or assuming banks loan them money, if say OpenAI goes under then the banks just lose that money.

When the stock goes from $150 to $600 that's not called dilution. Nobody cares about the number of shares in that situation.

The CEO of Tesla, Elon Musk, was sued over an extremely similar situation. So somebody will care.

That said, this is really about the principal. Sure, if I give you $10 and you give me a hamburger it's not like some illegal transaction. But to say the $10 comes from thin air is wrong. It doesn't come from thin air.

I would bet that if one day OpenAI decided to sell 10% of AMD the stock would crash from $600 to below $150. IIUC, there's 1.6B shares of AMD while only 54M shares trade daily so dumping 160M shares would tank their price [1]. If AMD gives OpenAI 10% of the company and OpenAI goes under, it's going to take AMD's share price with it.

[1]: https://www.marketwatch.com/investing/stock/amd

What Musk suit are you talking about?

The rest of your comment doesn't make sense.

His 56 billion pay package [1]. In order for him to receive it the stock would need to increase 13x [2] (the AMD stock increase from 150 to 600 is only 4x). Despite succeeding at doing that, he and Tesla were sued over the pay package.

If OpenAI fails then its going to have to liquidate the company. Selling 160M shares of AMD is going to tank it's price.

[1]: https://en.wikipedia.org/wiki/List_of_lawsuits_involving_Tes...

[2]: https://ir.tesla.com/press-release/tesla-announces-new-long-...

It's not really a similar situation. His pay package was invalidated because of how much control Elon had over the board and the shareholders not being fully informed of the likelihood that the necessary goals would be hit.

Whatever the merits of the lawsuit, it wasn't about the pay package being too diluting.

If OpenAI fails, it will be acquired and/or the shares will be sold in bulk. They're not going to log in to etrade and sell 160m shares on the open market.

> Whatever the merits of the lawsuit, it wasn't about the pay package being too diluting.

But this is exactly the point. If somebody is going to sue Elon when he 13x the share price then of course somebody is willing to sue AMD if they 4x it.

Elon's pay package was voted on by shareholders. AMD's deal with OpenAI had none of that so if anything it's more ripe for a lawsuit.

I think there's a covenant preventing OpenAI from dumping AMD shares on the open market. Obviously AMD's price will move down during the crash but at least the shares will be liquidated in an orderly fashion.

It's a joke that it is so obvious what they are doing.

> allows OpenAI to buy 160 million shares at 1 cents a share.

> I think at least part of the 10% is if AMD stock reaches 600.

AMD market cap today is $350B (at $200/share).

AMD would need to 3x their market cap ($1,000B) to be at $600/share.

Which would mean that OpenAI could gain $100B in AMD stock, for the minuscule cost of only $1.6 million (160 million shares at 1 cent each).

--

Sam is spinning the world on his finger tip with these deals he's crafting.

What is AMD getting that's worth giving OpenAI $100B? Sure, they're giving it from other stockholders not from their pocket, but still. It's presumably a lot of value, there has to be a good reason, no?

Is it that Sam promises to somehow make AMD increase their market cap, or help at least?

> What is AMD getting that's worth giving OpenAI $100B?

The other $300B

Where is this other $300B coming from? Is OpenAI paying AMD $400B or what? I looked at the article but it seems disjointed and hard to parse for me. And I don't see where it mentions some $400B coming to AMD one way or another. It's implied... how?

Sorry, this isn't sarcasm or anything like it. I just don't get it and your answer does not help.

I think the idea is that, OpenAI using AMD GPUs will help AMD become competitive against Nvidia in the AI space. If OpenAI is able to use them for their models, other companies will see AMD as a legitimate option and might switch to AMD for GPUs as well.

This would be where AMD is to gain new money.

OpenAI also has to gain, if it means access to more GPUs allows it to compete and be the winner of the LLM race. As the winner of the race, it would make new money, but also likely need to spend even more money on AMD to buy even more GPUs for years to come.

You have put your finger on the AI bubble's biggest problem right now. Companies are making promises that they are currently completely incapable of fulfilling, in the hopes that someday they can, and the stock market are valuating these promises as done deals.

Predicting the end of bubbles is well known to be a fool's errand, but if this AI bubble is still going in a year I can only imagine how casually these companies will have to be throwing around multi-trillion dollar promises to each other to keep the stocks pumped up.

> Companies are making promises that they are currently completely incapable of fulfilling, in the hopes that someday they can, and the stock market are valuating these promises as done deals.

That reminds me a lot of Enron. As long as the stock keeps going up everything is fine but when it does t everything comes crashing down.

The traditional "efficient market" theory would be: synergies. The market believes that AMDs value increased BECUASE OpenAI now owns it. That is to say, the market believes that OpenAI taking a stake in AMD increases the value of AMD.

There are a host of different hypothesis you could pose to explain that. Maybe OpenAI has some secret sauce they'll share with AMD now that they have a stake. Maybe OpenAI will be more likely to buy from AMD in the future. Maybe AMD can use the experience they get serving OpenAI to better their products. Heck, maybe OpenAI will pump the stock by having Sam Altman talk about it on some podcasts.

It's impossible to disentangle all of those theories, because different investors will have different beliefs and you only get an aggregate.

Thanks for explaining.

Imho AMD itself needs to have a theory, which underpins their signing of the deal. For my clueless self, that investors have various theories and we don't know what they are is ok-ish, but that AMD has a theory but keeps it secret yet it gets the result of stock rise... is fishy.

Everyone is going in circles making suppositions and estimations based on who knows what. That can't be healty, can it? There used to be requirements that publicly listed companies act with some level of transparency, and those requirements existed for a reason. I guess. I am certainly no expert in finance.

> but that AMD has a theory but keeps it secret yet it gets the result of stock rise... is fishy.

It's not secret at all. Companies announcing a deal like this usually include some PR material alongside it [1]. In this one, the quote is:

    “Our partnership with OpenAI is expected to deliver tens of billions of dollars in revenue for AMD while accelerating OpenAI’s AI infrastructure buildout,” said Jean Hu, EVP, CFO and treasurer, AMD. “This agreement creates significant strategic alignment and shareholder value for both AMD and OpenAI and is expected to be highly accretive to AMD's non-GAAP earnings-per-share.”

[1]: https://www.amd.com/en/newsroom/press-releases/2025-10-6-amd...

Market validation I guess.

Is there any real reason AMDs market cap can't be close to what Nvidia's is? Or like even half of what Nvidia's is?

My uneducated one word answer: CUDA.

Could quickly change if open alternatives were suddenly more popular or with stuff like ZLUDA

https://github.com/vosen/ZLUDA

if your castle had a moat like CUDA....

How's Microsoft's Direct3D moat working out for them now? It's turned out to have been much less of a moat than it once was. Triple-A titles that are developed for Windows using Direct3D 12 are getting support on Linux through Proton within days of release, or even at launch sometimes.

CUDA isn't even a moat for inference, only for training.

There is not. AMD didn't invest in tooling and interconnect technology the way Nvidia has, probably because of antitrust fears (or maybe mismanagement). But in terms of core GPU technology and fab, AMD is close to being a peer.

I've been saying this for several years now and it seems that someone finally listened :)

Try to use AMD GPU's for AI and you'll understand. Unless you have lots of your own engineers to throw at making their stuff work, it's easier for most companies just to keep throwing money nVidia's way.

I understand that it's that way today. But I am talking about "potential". If OpenAI and AMD engineers get their heads together and make some new software etc, couldn't AMD in theory become as valuable as Nvidia or at least half as valuable?

It seems like to take a 350M market cap company to 2B+ or a 6x+ increase in stock price would be worth doing for a few hundred million dollar investment in software and such?

> Sam is spinning the world on his finger tip with these deals he's crafting.

That was my reaction too, this sort of weird deal seems very Sam Altman style.

Like Elon Musk - ironically, the archenemies are very stylistically similar.

> I also don't get why there commiting so much to the future, are they sure of the quality of the products and their demand that much?

It's one big game of musical chairs, and everyone can hear the phonograph slowing down.

OpenAI is making these desperation plays because they've ran out of hype. GPT-5 "bombed", the wider public doesn't believe AI is going to keep getting exponentially better anymore. They're out of options to generate new hype beyond spewing ever larger numbers into the news cycle.

AMD is making this desperation play because soon, once the AI bubble pops, there'll be a flood of cheap unused GPUs & GPU compute. Nobody's going to be buying their new cards when you can get Nvidia's prior gen for pennies on the dollar.

I find it funny how people say GPT-5 "bombed". I noticed a significant improvement in maths and coding with GPT-5. To quantify were I've found the models useful:

- GPT 3.5: Good for finding reference terms. I could not trust anything it said, but it could help me find some general terms in fields I was unfamiliar with.

- GPT 4: Good for cached, obscure knowledge. I generally could trust the stuff it said to be true, but none of its logic or conclusions.

- GPT 4.5: Good for reference proofs/code. I cannot trust its proofs or code, but I can get a decent outline for writing my own.

- GPT 5: Good for directed thinking. I cannot trust it to come up with the best solution on its own, but if I tell it what I'm working on, it's pretty decent at using all the tricks in its repertoire (across many fields) to get me a correct solution. I can trust its proofs or code to be about as correct as my own. My main issues are I cannot trust it to point out confusion or ask me, "is this actually the problem we should be solving here?" My guess is this is mostly a byproduct of shallow human feedback, rather than an actual issue with intelligence (as it will often ask me at the end of spending a bunch of computation if I want to try something mildly different).

For me, GPT 5 is way more useful than the previous models, because I don't have a lot of paper-pushing problems I'm trying to solve. My guess is the wider public may disagree because it's hard to tell the difference between something better at the task than you, and something much better.

> I find it funny how people say GPT-5 "bombed".

I used scare quotes for a reason. It didn't "bomb" in the sense of failing [insert metric], it bombed in the sense that OpenAI needed it to generate exponentially more hype and it just didn't. (And on a lesser level, GPT-5 was supposed to cut OpenAI's costs but has failed to do so)

> I can trust its proofs or code to be about as correct as my own.

I have little to say about this, as I find such claims to be broadly irreplicable. GPT-5 scores better on the metrics, but still has the same "classes" of faults.

Gemini 2.5 was the first breakthrough model, people didn't know how to use it but it's incredibly powerful. GPT5 is the second true breakthrough model, it's ability to deal with math/logic/etc complexity and its depth of knowledge in engineering/science is amazing. Every time I talk to someone who stans Claude and is down on GPT5 I know they're building derivative CRUD apps with simple business logic in Python/Typescript.

On the flip side of it (and where most institutional investors are mentally) is that if OpenAI is to ever achieve AGI, it must invest nearly a trillion dollars towards that effort. We all know LLMs have their limitations, but next phase of AI growth is going to come from OpenAI, Anthropic, Google, maybe even Microsoft, and not some stealth startup. E.g., Only Big Tech can get us to AGI due to sheer massive amounts of investments, not a traditional silicon valley garage startup looking for their Series A. So institutional investors have no choice but to continue to throw money into Big Tech hoping for the Big Payoff, rather than investing in VC funds like 10 years ago.

AMD did this deal because it's literally offering financing to them. OpenAI doesn't have access to capital markets like AMD does. So it's selling off shares of its own stock to finance the purchase of billions of dollars worth of GPUs. And the trick appears to be working since the stock is up 30% today, meaning it has paid for itself and then some.

That “only big tech can solve AGI” bit doesn’t make sense to me - the scale argument was made back when people thought just more scale and more training was gonna keep yielding results.

Now it seems clear that what’s missing is another architectural leap like transformers, likely many different ones. That could come from almost anywhere? Or what makes this something where big tech is the only potential source of innovation?

The barrier of entry is too high for traditional SV startups or a group of folks with a good research idea like transformers. You now need hundreds of billions if not trillions to get access to compute. OpenAI themselves have cornered 40% of global output of DRAM modules. This isn't like 2012, where you could walk into your local BestBuy, get a laptop, open an AWS account, and start a SaaS over the weekend. Even the AI researchers themselves are commanding 7- and 8-figure salaries that rival NFL players.

At best, they can sell their IP to BigTech, who will then commercialize it.

Sorry I still don’t understand.

Are you saying you disagree that a new architectural leap is needed and just more compute for training is enough? Or are you saying a new architectural leap is needed and that or those new architectures will only be possible to train with insane amounts of compute?

If the latter I dont understand how you could know that about an innovation that’s not yet been made

Yup. LLMs can get arbitrarily good at anything with RL, but RL produces spiky capabilities, and getting LLMs arbitrarily good at things they're not designed for (like reasoning, which is absolutely stupid to do in natural language) is very expensive due to the domain mismatch (as we're seeing in realtime).

Neurosymbolic architectures are the future, but I think LLMs have a place as orchestrators and translators from natural language -> symbolic representation. I'm working on an article that lays out a pretty strong case for a lot of this based on ~30 studies, hopefully I can tighten it up and publish soon.

If it comes from anywhere else but it needs a lot of capital to execute, big tech will just acquire them right? They'll have all the data centers and compute contracts locked up I guess.

no amount of investment is going to make AGI just appear. It's looking more and more like current architectures are a dead end and then it's back to the AI drawing board just like the past 30 years.

> And the trick appears to be working since the stock is up 30% today, meaning it has paid for itself and then some.

It's a bubble. The tricks keep working until they suddenly don't, and then all the prior tricks unwind themselves.

Theres a phrase for this. Financial engineering.

The difference this time is that it's global coordinated collusion, and it's not just the superwealthy, it's states that are willing to go all in on this. If you thought the banks were too big to fail, the result here is going to be a nationalization of AI resources and doubling down.

In other words they are stealing capital from the rest of the economy. Starving it.

This is too top of the top to ignore. Everyone can see the scam now, it's a joke

It sure seems that way. The stock options are worth, at the current price of AMD stock, about 32.8 Billion dollars. AMD is giving out these stock options essentially for free in exchange of open ai purchasing chips from AMD.

So open ai are getting a 32.8 billion dollars rebate. But on what? Here the press releases are a bit vague. They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money?

I figure these GPUs are typically around 1kW (unclear if 6GW is including overhead like cooling, which might double(?) the power), so in the range of 3-6M GPUs.

If these are somewhere in the range of $10-30k (who knows what current or future models are contemplated), that's $30-180B. So clearly the low end doesn't make sense for the 'rebate', but at the high end a ~17% discount doesn't seem unreasonable.

> They say that Open ai committed to buying six gigawatts of AMD chips. Anybody know how to convert that into money?

MI350 spec sheet says it's 1000 watts typical. So we're talking about something on the scale of a couple million chips.

Because of the vesting milestones the stock price of AMD would go up by such an extent that creating more s hares would not dilute the share price.

Obviously, for the stock price to go up money needs to come from somewhere. It makes sense that this deal would lower the NVidia stock price, so technically it will be NVidia investors waiting too long to respond to this news that will be paying for this. A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't. The rest is just momentum and this would kill that.

The real winners will be TSMC and ASML

> Obviously, for the stock price to go up money needs to come from somewhere.

Not convinced that’s true anymore in current climate. Bigger numbers announcements and AI Pixie dust works too apparently lol

I mean the potential value comes from the future either way.

If you just print money and nothing else, it inflates and becomes worthless affecting all involved.

If the money turns into technical progress or products then the entire economy grows.

The money actually has to be spent on real goods for which supply is inelastic for this to happen. If it's instead saved or used to pay taxes it won't cause any inflation.

I suppose the increased savings means there more potential for the private sector to cause inflation if everyone decides to dissave at once, but that's sorta a last resort.

> potential value comes from the future

In a strictly commercial sense yes but stock markets decoupled from that long ago. Whether it’s wallstreetbets up to shenanigans or a market crash it’s got little to do with actual future and more With sentiments. You’d hope it would revert to fundamentals eventually but markets sure seem happy to not do that

You can keep inflating imaginary piles of money until someone tries to grab too much of it... Add in loaning against the valuations and you can keep doing it even longer...

> A tax on the mistaken believe that NVidia has an monopoly on putting transitions in a particular configuration which they obviously don't

NVIDIA doesn't place transistors in particular configurations. Foundries do that for them. And it is currently common sense that the software is the moat, not the hardware design.

Good luck changing the ecosystem to use AMD.

> that the software is the moat, not the hardware design.

For inference that’s hardly relevant, though?

For training its not exactly insurmountable either.

GPUs are also used to speed up inference (the math is virtually the same). You think your ChatGPT queries are running on x86 servers?

But do you think with the profit margins of NVidia, others won't be offering competing chips? Google already has their own for example.

From that perspective the notion that NVidia will own this AI future while others such as AMD and Intel standby, would be silly.

Im already surprised it took this long. The NVidia moat might he software, but not anything that warrants these kind of margins at this scale. It is likely there will be strong price competition on hardware for inference.

"Subsidizing" is one way to put it. But these are options not shares. We will discover in a few years that it was actually AMD who is paying OpenAI to take GPUs.

Maybe they are using the $100 Billion NVidia investment to pay for this:)

If this ship sinks they are all going down together.

This is money from nothing, right? They just found the tree of money.

To paraphrase Dire Straits - The money from nothing and the chips for free.

Similar to how Microsoft bought out nearly half of OpenAI, though they offered compute credits IIRC. I wonder how much into Microsoft's investment OpenAI is in.

Edit: Apparently what Microsoft owns is 49% profit-sharing interest in OpenAI, specifically in the 'capped profit' for profit subsidiary. So weird, but hey, it's still a slice of the pie. Plus they can exclusively sell access to the models.

Microsoft seems to have made a good deal: it got the models AND profits.

Also microsoft is pushing copilot to office and I think it will sell. Since they sell to general B2B and not only to the peogrammer niche.

AMD is trying to buy market share by donating 10% equity. I also think it is crazy

Yeah, I heard about when ChatGPT removed I think it was O4? apparently there's an entire community devoted to "role playing" or rather dating a character powered by the model. GPT5 broke their entire relationship. Me and a few friends agreed it might have been worth spinning up a dating GPT O4 based service for those people to pay to migrate their AI 'companions' to. Azure still has these "abandoned" models.

On the other note, it also helps OpenAI because they don't have to manage setting up all that infrastructure just to let others use the model.

Hopefully part of the contract is that OpenAI must make any software frameworks they build to utilize AMD GPUs open source.

> In case you're wondering how OpenAI could afford to buy 10% of AMD while they are hemorrhaging money -- the terms of the deal allows OpenAI to buy 160 million shares at 1 cents a share.

Ha ha, OpenAI can afford this because your mom uses a grand total of 7 pieces of software owned by 5 companies, 4 are the largest public companies in the world, and the 5th one is OpenAI.

Lol and I had to pay >$60 a share for my little bundle of AMD!

> I could be thinking about this the wrong way but it appears that AMD is basically subsidizing the cost of the GPUs with equity.

Yes, you are reading it wrong. The big winner here is AMD, not OpenAI.

If there is any signal here, it's that AMD is still in the AI game. AMD stock is up 30% on this news.

I didn't mean to imply that there was a winner or loser. Just that AMD was subsidizing it's GPUs with equity.

I think there are logical reasons for both companies to agree to this deal. AMD is trying to break CUDA dominance. OpenAI is getting extremely cheap compute for expansion and they'd also benefit from the Nvidia monopoly falling if that ever happens.

OpenAI isn't publicly listed so it's hard to tell how this affects them from a "share price" concept. However for a company that's not public and only has capital from financing rounds and revenue, this gives OpenAI a lot more flexibility for the future and hedges risk while maximizing upside.

Its called hedging your risk: making sure Nvidia isn't the only game in town.

OpenAI now has an option to buy 10% of AMD for $0.01 per share, subject to certain milestones.

Basically, AMD is giving up equity to buy its way into the AI market.

It's fantastic news, because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips.

We all want an alternative to Nvidia and cuda. This partnership could deliver it in the not too distant future.

> It's fantastic news, because OpenAI and AMD will now work together to develop decent software libraries for AI on AMD chips.

Too fast to jump to conclusion. I'd say they will work together to develop software specifically designed for OpenAI products. It is a giant question mark whether we'll get libraries for general purpose computing out of this.

OpenAI and AMD both have strong incentives to chip away at Nvidia's dominant position, and the best way to do that is by releasing software tools to the public.

Ask yourself: What would first-class PyTorch/Triton and Jax support for AMD hardware do to Nvidia's dominance and pricing power?

That argument could apply to every company who build their business on AI (except Nvidia) but we haven't seen any notable initiative or any significant movement in the past 3 years.

I would not put my bets on private companies' goodwill. I'd rather believe they'll do whatever is most important for their business priority, understand things at their face value, and then hope for the best.

I disagree. My argument could not apply to other companies, because AMD is the only other maker of GPU hardware that could conceivably compete with Nvidia at scale in the AI market. Intel's GPUs have never been in the same league. New alternatives like Cerebras, etc. are too small, too different, and too unproven at scale.

I'm not betting on anyone's goodwill, I'm betting on OpenAI's and AMD's self-interest. Please don't attack a straw-man.

My understanding from the more hardware savvy friends I have is that AMD is better for inference (so when you run a model) vs for training Nvidia is still king. Would be interesting if OpenAI does in fact take AMD's offer and how they use it (if they even share openly).

Today, yes, it's true that AMD hardware can be competitive mainly for inference.

The story here is about the future. Over time, OpenAI would benefit if AMD hardware becomes competitive for training too.

Nvidia currently gets to charge whatever the market can bear on its dominant training hardware.

If AMD hardware becomes a real alternative for training, Nvidia will be forced to compete on price.

The reason I think its worth noting is that Inference is definitely what I imagine an insane amount of their computer is / will be spent on. I could see a very optimal setup where training is all Nvidia, but inference becomes reliant on AMD.

Larger memory, weaker comms. You can optimize for this by doing things like increasing batch size/data parallelism vs sharding schemes with more comms.

At scale training won’t be able to avoid comms entirely, while many models can fit in a single MI300 for serving.

> OpenAI

> "If they even share openly"

That fact that this even needs to be pointed out but is normalized in the AI industry. Sadly, in the history of Open AI, they've been anything but open.

For inference there are many solutions like groq. The margins there will be small.

The fat margins is in training, in NVidia hardware.

Inference margins will be small(er) but it will be much bigger in market size than training.

That said, I'd much rather be leading in training than inference, of course. Nvidia still leads in inference, by the way.

OpenAI are also using the market to fund some of their rollout instead of going public/giving up equity.

It's only fantastic news if there is no bubble.

If there is a bubble, AMD just gave away $160m for nothing in return.

The option to buy shares seems pretty well locked down with multiple vesting conditions So pretty unlikely that this ends up in a “for nothing” space

https://ir.amd.com/news-events/press-releases/detail/1260/am...

No... because the warrants can only be exercised if the share price is at certain points. If AMD goes down, the warrants can't be exercised at all. E.g. we know at least one share price points is when AMD shares are worth $600/share.

I think OpenAI will try and continue this elsewhere, which would be pretty worrying. It lets them not give up any equity, just use their name to pump stocks and earn capital.

That’s exactly it. Their only competitive weapon is brand name right now and they are using that for all its worth

> AMD just gave away $160m for nothing in return.

Where'd you get this number? The equity is worth closer to 34bil if fully realized?

Nothing in return? AMD stock is up 30% today on this news.

Feels like we're living through a Michael Lewis book.

OpenAI estimate that it takes around $50bn to stand up a 1GW datacenter. This deal is 6GW worth of chips. Their projected revenues out to YE-2029 are $300bn. OpenAI will spend a decades worth of revenues building & filling the datacenters to house these chips, before accounting for their AI research, training, or inference spend.

Don't forget that OpenAI also has a similarly-massive deal with Oracle and another one with Nvidia. And its own Stargate initiative. And probably a couple more massive contracts with neoclouds to use more stuff.

Like best possible scenario is OpenAI merely optioning from literally everybody because they don't think they have a shot at getting any capacity otherwise. There is just no possible way that they can actually afford all of the buildouts. For that matter, there's not even any possible way for all of these buildouts to actually be completed.

if you buy all the chips, no one else can build agi. sama probably

"Feels like we're living through a Michael Lewis book."

We definitely are ! The BIG question is - what chapter are we in ?

This seems to be OpenAI's path to victory in the AI race. Buy up the supply chain of compute to the extent that no other competitor could possibly have access to the same compute. If they are able to shut out Google/X.AI from the market, there really aren't any viable firms to keep financing next generation models on a pure compute scaling basis. I'm leaving out Anthropic as they don't appear to be as compute focused as X/OpenAI/Google. It's unclear if compute is the sole determiner of AI leadership in the long term or just a contributor.

The 10% option is interesting.

As a comparison of stocks over the last 5-years:

           1-Year   5-Year   Market Cap (Today)
           ------   ------   ---------
  AMD       20%       150%   $0.35T
  NVIDIA    50%     1,250%   $4.5T

So a healthy portion of AMD overall 5-years gain are just from this announcement today.

And OpenAI ($0.50T) is currently valued more than AMD ($0.35T) itself.

https://finance.yahoo.com/quote/NVDA/

https://finance.yahoo.com/quote/AMD/

Finally. AMD had recently been pretty stagnant which made little sense given their dominance on CPU and vaguely competitive GPUs (cuda notwithstanding)

How is OpenAI valued? It's not publicly traded.

Sale of shares on secondary market at that valuation.

https://www.reuters.com/technology/openai-hits-500-billion-v...

It's valued from secondary markets based on how much it can raise from private investments. These get reported out eventually which juices the hype further in a bit of a vicious cycle. this cycle also has quite the incestuous component too with how every major company seems to have their hands in each other's pants.

I do hope that this leads to improvement in the HIP/ROCm software ecosystem.

It’s definitely lacking in stability and polish compared to what NVIDIA has built. (Ask me why I’m on my third rebuild of LAMMPS this morning…)

HIP/ROCm is waaay better than it was a few years ago. It took a very long time, but AMD finally learned the importance of software.

Are consumer cards also benefiting from the improvements or only datacenters?

When I was around 10 years old I remember us asking the teacher why not just print money to solve the worlds problems and the teacher scoffing. It took me another 15 years to realise that’s basically what central banks do, especially these last five years. BTC is at $125k, gold at $4000, and every other week we are inundated with some multi-hundred billion dollar deals somewhere or other. All this talk about multi GW data centers where one will notice the consumer is no where to be found, just like an extension lead plugged into itself.

Are we supposed to pretend that this is normal? Does anyone not feel like this push for AI is a last ditch effort to save the global stock market, that it MUST work out?

IMO underappreciated is that a big bump in the AMD stock price helps AMD a lot because it will help it attract talent. NVIDIA has a lot of very talented people with high standards and that’s a huge part of their success.

This whole thing looks like a bubble in slow motion.

A “non-profit” that somehow buys stakes, signs multi-billion supply deals, and moves markets based on promises of future models — all while technically owning nothing tangible. They’re leveraging their own paper value to buy more paper value.

It’s circular finance at scale: every deal increases the perceived valuation, which then becomes collateral for the next one. No audited revenue stream, no proven business model - just a loop of hype, compute contracts, and self-referenced worth.

At some point, someone’s going to ask what exactly is being sold here besides narrative.

What surprises me is the pace and size of these announcements. So many announcements so fast and each one at least 100B all involving openai. Reminds me of a quote by Chuck Prince - Citigroup CEO from 2008 - "As long as the music is playing, you've got to get up and dance"

Pretty much. Strip away the AI narrative and there’s not much else driving growth right now - manufacturing’s flat, consumer spending’s slowing, and traditional tech margins are shrinking.

This artificial boom in “AI infrastructure” is basically the last engine keeping the charts pointing up. When that music stops, there’s nothing underneath it but leverage and power bills.

[dead]

Highly relevant money stuff from today: https://www.bloomberg.com/opinion/newsletters/2025-10-06/ope...

In a very real sense, OpenAI caused a 25% increase in AMD’s value by announcing the deal, and was allowed to capture about half of that out-of-nowhere value for itself by these options.

OpenAI has signed a deal with AMD that they will buy $100B worth of gpus.

On top of the gpus... AMD has offered cheap equity to sweeten the deal and help them get financing to pay for the gpus.

Am I getting this right?

AMD was up 23% today. Expect many, many more of these cockamamie deals. I heard Books-a-Million has a previously unannounced GPU business line.

The terms of some of these deals now are so completely bonkers it would be funny if it wasn’t so scary.

If someone was writing the script to “The Big Short 2” about the AI bubble they might struggle to come up with some of these things with a straight face.

Finance folks are salivating at the once in a generation opportunities ahead when this whole thing crumbles. CNBC seems to have at least one segment a day on “What’s your AI bubble burst play?”

Whatever some analyst say about medium term future of stock markets. I can't see this ending in any other way than very ugly. Or USD to become meaningless...

I wonder what they intend to use for networking, it’s not really clear from this.

AMD Pensando DPU

https://www.amd.com/en/products/accelerators/pensando.html

This isn't stated in any of their press releases.

Some white-boxes on Broadcom chips I guess.

This is very smart. AMD has left this market untapped for a long time but will close the gap with nvidia rapidly.

And in situations like this the technology being built by Modular becomes incredibly important.

Those vesting milestones must be steep for them to offer 10% of the company at $0.01/share ($1.6M).

It’s quite a good strategy to counteract the prevailing sense that “No one ever got fired for buying Nvidia GPUs”.

AMD just doesn’t know how to compete with Nvidia. The best it can do is charge 10% less and release GPUs about the same level of underwhelming performance as Nvidia.

Maybe they wouldn’t need to sell equity if they made better faster cheaper products than Nvidia.

But Lisa Su can’t bring herself to compete. Which is very strange because she brutally competed with and destroyed Intel.

> But Lisa Su can’t bring herself to compete. Which is very strange because she brutally competed with and destroyed Intel.

Maybe making cutting-edge GPUs is actually quite an engineering challenge, and not entirely down to the competitive will of the CEO?

AMD already make GPUs that are competitive with Nvidia at every tier except the very top end.

It’s the positioning and pricing that isn’t competitive.

You think Nvidia's advantage on LLM is hardware? It's the software ecosystem around the GPU (that Nvidia took a decade+ to build) that is the advantage.

Are they competitive per Watt and per mm2 of die?

And software

> and release GPUs about the same level of underwhelming performance as Nvidia.

What's the standard that they're underwhelming relative to? I thought Nvidia was the current big fish there.

NVidia is terrible value for consumers when comparing their own offering from previous years. The graph from https://gamersnexus.net/gpus/great-nvidia-switcheroo-gpu-shr... shows how low/mid segments become weaker and weaker with each generation.

Meanwhile AMD doesn't try to disturb the market, they keep their pricing at "price of similar NVidia card - $50". They aren't going to gain market share that way.

Unlike Intel, Nvidia is family.

At the end od the day it is not the CEO who invents / designs / builds the stuff.

I mean, they could recognize that Nvdidia has better ecosystem and they could provide something similar (CEO's job is to set this), but saying "just make better chips" is kind of funny.

I mean, I worked in companies where the CEO couldnt figure this out, but come on. It's AMD.

>AMD just doesn’t know how to compete with Nvidia.

They know exactly how to compete with Nvidia but choose not too.

>But Lisa Su can’t bring herself to compete.

Because she is colluding with her cousin Jensen.

“He’s my cuz so I’ll let him win the biggest business battle there is.”

I dunno, doesn’t have the ring if credibility to it.

Don’t know how it is with them, but can totally see it in an Asian family lol, especially with the added male/female dimension .

I think it's quite obvious why Lisa Su isn't motivated to financially crush her first cousin once removed. AMD is doing quite well in the CPU space and as such isn't even forced to compete in the GPU space. AMD could take market share from Nvidia, but they don't have to, because there is no one else who would take it either.

So the “we’re so successful, we don’t need any more business, so we’re just cruising”, strategy eh?

Doesn’t resonate for me as how most American companies do business.

I don't know why Bloomberg TV are asking where this money comes from for OpenAI. It comes from the AMD stock holders. If the AMD stock pumps then OpenAI gets free money to buy more, without giving up equity. If it doesn't then OpenAI just walk away.

OpenAI is supposed to be buying something like $100 billion of chips from AMD. On top of the hundreds of billions to like five other companies for AI chips and other compute. Where do those several hundred billions come from? That's the question being asked here.

Just the 1st tranche of shares would be like $6 billion at $220 so if they borrow against that they can fund it. If the hype continues they keep it going

Not all of the $100 billion are purchases by OpenAI ("AMD expects to receive more than $100 billion in new revenue over four years from OpenAI and other customers").

For some reason the OpenAI portion of this deal is quoted in gigawatts rather than number of MI450s purchased, which makes it hard to tell how much of that $100 billion is from OpenAI. It's probably around $80 billion.

specifically, it's coming from new AMD stock holders that are buying shares at much higher than current prices. And those shareholders are buying a company that they value more because AMD is better positioned in the LLM market because of the side effects of the OpenAI integration.

Existing AMD shareholders are getting a great deal; their shares are worth 30% more today and will be worth 5X more if OpenAI gets to use their option. Yes, there is some dilution for existing shareholders, but only after a 5X gain.

OpenAI basically self financed the buying of tens of billions of dollars of GPUs by increasing the enterprise value of AMD, and taking a cut of that. And the increase in value is not just the announcement, but the integration work needed to make AMD GPUs as good as Nvidia for inference.

They are getting a meaningless deal unless they can nearly triple their market value from here. Sam isn't buying AMD shares for more than a penny, what should we value it at?

>Existing AMD shareholders are getting a great deal; their shares are worth 30% more today and will be worth 5X more if OpenAI gets to use their option. Yes, there is some dilution for existing shareholders, but only after a 5X gain.

So if I read this right then an existing shareholder benefits up to the point where AMD stock reaches the $600/shr level and after that it becomes a dilution.

For the maximum benefit to existing shareholders, the stock price must get near $600/shr and if that looks unlikely they should consider other investments on less speculative terms. This whole AI thing feels like I'm watching the soapy fluid flow along the bubble exterior to form a droplet of soap on the bottom, thinning and weakening the bubble until it pops due to fluid film rupture at the top of the bubble as the droplet leaks away due to gravity.

Yes it’s a wealth transfer from existing amd shareholders

This industry is the most intense game of musical chairs I've seen in a long time.

i grew up thinking finance was boring. after 2008, i started to pay a bit of attention, but the last few years of financial shenanigans have been absolute cinema, it feels like we are approaching the season finale.

Just enjoy it if you can’t avoid it

That's how those Titanic violinists probably felt!

Alternatively, they're just doing a clips episode based on 2000.

Definitely some déjà vu

And you have that right.

And now imagine what will happen when OpenAI makes deals with Nvidia and AMD. Do you think Hyperscalers will just watch?

I expect Musk to make a $1 trillion deal soon. I guess, that's why he wants to get the $1 trillion from Tesla.

And do you think Meta, Amazon, Microsoft and Google will stand by while Altman and Musk are buying future supply from Nvidia and AMD?

I love that. As an investor in Nvidia, I hope that these future promises will push the stock 4-5x quickly in Cisco fashion because then I can sell and retire in my 40s with a huge pile of money watching the bubble explosion on some beach on an island :)

Trading any of this, the only question that you need to answer is:

What is more painful to you, missing some gains on the way up or holding positions that have flipped from positive to negative very rapidly?

Markets like this, the moves will be violent in both directions, not just on the way up.

This is all assuming that the government will be able to bail them out of trouble. But the bond market / interests rates / inflation and government debt mean they could so serious damage to the country if they tried.

My cost base of Nvidia is $1 so for me to lose is that Nvidia gets back to way before COVID valuation.

Nvidia is more worth than $1 per share on gaming alone.

This looks like the house money effect. It's sort of a corollary to the sunk cost fallacy.

Totally fair. If you've got a great cost basis, you can stress less. The question then becomes what feels worse:

Watching a position you sold double or watching a position you're holding get cut in half?

The fact you are even writing this usually means you should sell immediately.

[dead]

Modulo the obvious financial chicanery, this does confirm to the market that Nvidia doesn't have a moat. So probably positive for AMD in the long term even when the deal itself goes sideways.

Two years ago, I built my entire business exclusively on AMD on the bet that one day they would wake up to AI and dive head on into it. They were totally behind on NVIDIA and my feeling was that Lisa Su would not be able to ignore what was coming. This news far exceeds my expectations for how quickly things are changing. Feeling pretty good now.

AMD gives OpenAI $30B worth (todaty's value) of AMD stock.

Cash-poor OpenAI pledges/promises about ~$100B in purchases.

AMD makes back the money on (a) 30% volume discount is normal? (b) stock pop from AI hype (AMD popped up ~$100B market cap on the news.) ?

It's a no-brainer, no? Nobody wants to pay the Nvidia tax.

Infinite money glitch

[dead]

they're just printing money for each other at this point

Some refer to it as "circular financing".

It's "seller financing" but to a degree we've never seen before in an industry (which create these "circular" effects).

There's a good HN thread from 2-days ago on this subject (200+ comments).

https://news.ycombinator.com/item?id=45473033

What a mess. When they have to write about how “circular financing” became highly regulated in the future, I hope they know that the problem was not confusing in the big picture.

Maybe I can get quoted in a sidebar:

“Hey Econ students, we normal people could see that the AI market was extremely gamed. We can see the investment feedback loop. It is just that the organizations continuing it have control over so much money, they don’t have to stop and ask society in general for permission to continue. Really this is a symptom of the wealth inequality crisis that they covered chapter…”

This method of financing is not novel. But anytime you see an unnecessarily complex deal like this, one should think very carefully about why they didn't opt for a simpler method, e.g. simply selling stock in the open market.

The reasoning behind such a deal are usually not a good sign for the underlying health of the companies involved.

I'm assuming this is what you mean by 'simply selling stock in the open market' so correct me if I'm wrong but Why would Open AI go public when they can raise so much private money they're valued at 500B ?

It certainly wouldn't be for fear of a lack of investment. AMD is up 30% from this announcement alone.

Openai can't go public at present. They have an irregular non profit structure. They've been negotiating with Microsoft but can't convert out of their current structure without getting a new deal from Microsoft accepting the conversion.

The real, sustained value creation for AMD is if their GPUs can be competitive with Nvidia for inference or training. The market is currently betting that AMD will get that "spillover" effect from working with OpenAI to get their chips + software in a state that openAI can use at scale.

So day 1 valuation is mostly hype, but that hype may translate into real value later.

Oh, we saw it before. 1998-2000. Cisco, Sun, et al, "investing" in the dotcoms so those dotcoms could turn around and use the funds to buy servers and routers from them.

It's the opposite here. It's as if the dotcom is investing into Cisco and Sun, so that it can buy servers and routers from them.

Not really. This is AMD investing in OpenAI (albeit in an unusual way, with stock options) not the reverse. Same as the Nvidia deal. Same as hyperscaler investment in OpenAI and Anthropic. The people selling stuff to the AI Labs are the same ones funding them.

I can't figure who is actually investing in who?

OpenAI may own 10% of AMD, and that seems like OpenAI investing in AMD in exchange for buying 6GW of GPUs and 160million in stock.

OpenAI isn't giving AMD money to get AMD stock. AMD is giving OpenAI its stock (in the form of a call option with a $0.01 strike).

I understood it as, OpenAI is giving AMD money, by buying 6GW of GPUs from them.

But if it results in their stock reaching 600$, then AMD will give back the money that OpenAI spent on GPUs as 10% stock options into AMD.

Which sounds like, no one is really investing in each other, they're both like exchanging money back and forth, where both hope to gain some extra money by propping up the AMD stock with the announcement, hoping it helps make AMD more competitive on the GPU landscape.

Did I get it right?

Nvidia owns a piece of OAI, and now Nvidia would own a piece of AMD. I am just waiting for Samsung type of circular ownership structures here in the US.

The good part is that the next financial crisis when OpenAI sinks probably won’t be a systemic one, it will definitely drag others down and the stock market will readjust, but hopefully the US economy will remain afloat

Can you explain why you think that is? The SP500 has never been more top heavy and when those 7 or so all AI associated incest stocks falter I can't see anyway it's not going to be a bloodbath of the decade long type.

I don’t know, just intuition. Each crisis is different and impossible to predict, otherwise I’d be retired, which I’m not.

Completely agree, I’d expect all of those to take a big hit, and some more than others, but I don’t think Microsoft or Google would disappear. As for the SP issue, if this trend continues, people might start seeing the SP as the opposite of diversification (at least in the stocks market sense) and will have to start looking for something else.

BTW, I’m almost an all-in SP investor myself so I’ll have to navigate that dip too, lol

With some booms you have something to show for it, for example, a railway network. With others, such as tulips, there is nothing to show.

After the predicted bloodbath, do we get some infrastructure and products worth keeping at the end of it? If so, does that mean the system can limp on, after even more money has printed, or do we get to another big fork in the road where systematic change is required?

No it is not printing money. Shares are not money.

When the bubble pops, the US' FTC will need to place limits on those circular deals like this.

Literally the whole big tech will melt. There are banks that are backing up certain GPU deals and those will be hit with billion losses as well.

Imagine once they have to depreciate those $1T+ of GPUs, data centers and the like that can't even be on resale for gaming.

Imagine when economic blocks like the EU and BRICs starts to reject more US software, when so much of those Big Tech revenues are made abroad. The recent geopolitics plays being a key factor.

This looks really bad.

> US' FTC will need to place limits on those circular deals

So...after the next election and a bunch of significant US governance reforms.

The bubble pops when Apple releases an iPhone that runs a good enough for most things LLM locally. At that point cloud hardware investments will plateau (unless some new GPU melting use case comes out). Investors will move from nvidia, AMD into Apple.

As a local LLM enthusiast, I can tell you that it's useless for most real work - even on desktop form factors. Phones catching up is ever farther out.

Based on the recently released graph of how people are using chatgpt. ~80% of use cases (practical guidance, seeking information, writing) could presumably run on a local model.

For video use cases, which will become increasingly popular, we are a long ways away.

Wan runs on local GPUs and looks amazing.

Sora 2 takes a lot of visual shortcuts. The innovation is how it does the story planning, vocals, music, and lipsync.

We'll have that locally in 6 months.

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Or just a mini configured default 128GB or 256GB.

I've been using Qwen3:32b on a 32GB M1 (asahi) and it does most of what I need, albeit a bit slow, but not slow enough that I´d pay monthly for remote ad delivery.

I suspect this huge splurge of hardware spending is partially an attempt to starve the market of cheap RAM and thus limit companies releasing 128GB/256GB standalone LLM boxes.

What's the advantage of that, exactly? Why would you want something very compute intensive run on your phone instead of just using an API to data centers with great economy of scale?

My assumption is that most users won't actually care if the LLM is in the cloud or device. That said, quite a few folks have iPhones and Apple's only way into the AI race is to go to it's strength, 1B+ hardware devices that they design the silicon for. They will produce a phone that runs a local LLM and market it as private and secure. People upgrade every couple of years (lose or breaks) so this will drive adoption. I'm not saying people will vibe code on their iphones.

Price, for one. I don't mind running a local model at half the speed if all it costs is electricity.

A local model basically allows me to experiment with running an agent 24x7, 365 days a year with continuous prompting.

SaaS won't be able to match that.

why do you think LLM's will get good enough that they can run locally but the ones requiring nvidia GPU's will not get better?

The models running on $50k GPUs will get better but the models running on commodity hardware will hit an inflection point where they are good enough for most use cases.

If I had to guess I would say that's probably 10 or 15 years away for desktop class hardware and longer for mobile (maybe another 10 years).

Maybe the frontier models of 2040 are being used for more advanced things like medical research and not generating CRUD apps or photos of kittens. That would mean that the average person is likely using the commodity models that are either free or extremely cheap to use.

ok, you can technically upload all your photos to Google cloud for all the same semantic labeling features as iOS Photos app, but having local, always available and fast local inferencing is arguably more useful and valuable to the end user.

that's... some years... from now

The new iPhones barely got 12gb of ram. The way Apple is going iPhones will have enough ram for llms in about 100 years

Trying to compare RAM size and CPU cores is so yesterday. Apple owns the entire stack they can make anything fit into their core if they so desire.

What's the benefit to running LLMs locally? Data is already remote, LLM inferencing isn't particularly constrained by Internet latency. So you get worse models, performance, and battery life. Local compute on a power constrained mobile device is required for applications that require low latency or significant data throughput and LLM inferencing is neither.

> What's the benefit to running LLMs locally?

At work:

That I don't rent $30,000 a month of PTUs from Microsoft. That I can put more restricted data classifications into it.

> LLM inferencing isn't particularly constrained by Internet latency

But user experience is

30k in a month is an enormous amount of tokens with Claude through AWS Bedrock. And companies already commonly trust AWS with their most sensitive data.

The data you need is mostly not remote. A friend works at a software development company, they can use LLMs, but only local ones (local as in their datacenter) and it can only be trained on their code base). Customer service LLMs need to be trained on in-house material, not generic Internet sources.

The general advantage is that you know that you're not leaking information, because there's nowhere to leak it to. You know the exact input, because you provided it. You also get the benefit of being able to have on device encryption, the data is no good in the datacenter if it's encrypted.

Local as in datacenter is the key there. The original comment was about end user devices.

https://geohot.github.io//blog/jekyll/update/2025/03/08/AMD-...

It was inevitable, this basically marks the end of affordable gaming GPUs, upgrade while you still can

It's a joke, they're not even trying to disguise the circular money flows anymore.

Similar infinite money glitch to the dot com boom.

I feel like I’m reading headlines from 1929. Surely everyone knows how fake and pyramid all these deals are but no one seems to care, they all think they will find a chair when the music stops.

I wonder what we will do with all that compute if no one is going to use it...even if we achieve AGI it won't run on this generation of hardware. Are we just gonna brute force architectures or wtf is going on?

I assume there's at least one generation of re-sale value. There's a lot of smaller companies that could use GPU capacity and would if it was cheaper. I wonder how the math works out though -- are power requirements such that the actual costs aren't worth it? How long before the chips just get thrown away?

Cheap cloud gaming.

Those GPU's will finally push pixels again :)

> Cheap cloud gaming.

> Those GPU's will finally push pixels again :)

Have they ever? I wonder if, say, an H100 even supports graphics APIs.

H100s have certain tradeoffs that makes gaming not as energy efficient.

Funnily enough, H100s are already old hardware, and soon will all get fully depreciated.

Billions and billions of depreciated assets!

Cloud gaming sucks due to latency, not price.

Which is something we already knew a decade ago.

Just like we knew self-driving AIs are not reliable.

The magical thinking was assuming they would just get better.

Played forza motorsport 5 on xbox cloud gaming and could not notice it. Of course I am the most non-serious player ever, but I really tried to notice, and for my standards it was fine.

maybe I'm just over sensitive to it, but I can't even stand playing when the tv isn't on game mode. can't imagine waiting for controller input to make a server roundtrip

Not even an issue anymore. I have no issue playing FPS games like call of duty multiplayer via GeForce Now and can be decently competitive. I do live close to the servers though.

Cloud gaming can have lower latency than local consoles. https://www.eurogamer.net/digitalfoundry-2022-geforce-now-rt...

They won’t. High end AI GPUs get stomped by mid tier gaming GPUs on pixels

There will definitely be takers though. Can see scientific community for example loving some cheap GPUs

> As part of the arrangement, AMD issued a warrant that gives OpenAI the ability to buy up to 160 million shares of AMD for 1 cent each over the course of the chips deal. The warrant vests in tranches based on milestones that the two companies have agreed on.

This is money printing, just in the private sector. We know what happens when governments do it, and it's not good.

It’s quite specifically not money printing, because it’s backed by something.

It could be bad sure but it’s not money printing

You're right. It's not really money printing, at least not directly. Only banks can print money.

What these recent deals do is inflate asset prices by making (future) revenues appear higher or perhaps just more certain than they really are.

Assets can be used as collateral for loans. If someone were to use their AMD shares as collateral for a loan at a commercial bank (not a margin loan), that would be money printing and you could print more of it today than before the deal was announced.

Backed by what?

Ownership in a company.

Compute resources.

So like Bitcoin?

Not the same, since if you buy Bitcoin, you don't have partial ownership of the machines used to mine and also these machines being used for a singular purpose which you cannot change.

It is backed by AMD stockholders, whose stock just got diluted.

It's like in that movie "Social network"

And high end networking gear will always have a buyer, right Nortel?

Lucent agrees: even used, the product will retain 90% of list price because the market has an infinite number of VC-backed buyers.

> because it’s backed by something

If I finance a car backed by hopes and dreams, I'd be driving real good.

I'm very ignorant, will AMD shares get diluted? or how is it money printing?

AMD issues new shares and gets a penny (read: effectively zero) back for them.

ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI.

But all else is not equal. OpenAI only gets the shares if they buy AMD GPUs. The intent is that this offsets the dilution by making AMD overall more valuable. (This is why the stock price jumped on the announcement) It's a GPU subsidy paid for by AMD's shareholders rather than AMD itself.

The real risk is that this further entangles AMD in the AI bubble. OpenAI already has enormous datacenter construction obligations. The likelihood of them failing to meet these new obligations, and thus this deal falling through or otherwise not materialising, is pretty high. If the AI bubble goes *POP*, AMD will be hurting a lot more than before this deal.

> ALL ELSE BEING EQUAL this means everyone holding AMD has 10% of their equity/value taken away and handed to OpenAI.

But the stock is up 30% on the news. So lose 10%, but gain 30%, so net 20% beneficial to equity holders?

Percentage math doesn't quite work that way. (130% * 90% for gaining 30% and then giving away 10% of that, is 117% not 120%)

But yes. That's the intent.

The "problem" is that OpenAI doesn't have any of the shares yet, and it's unclear how much they actually will get. Right now AMD shareholders have the full +30% gain with none of the loss. But will the +30% gain be wiped out on the news OpenAI won't be buying as many AMD GPUs? Only time can tell.

The shares haven't been issued yet, so there isn't any dilution. Equity holders could sell their holdings now and benefit, because when OAI exercises the option and gets 160m shares for peanuts, they will sell those shares ASAP to bring in cash to pay for their orders of AMD chips.

It is dilution. 160 million shares of AMD for 1 cent will be added. The idea is that the value increase of the remaining shares enabled by the OpenAI cooperation will be stronger than the decrease caused by dilution.

It isn’t printing money (money supply was not increased, and no one has access to more money due to the contract signed between the two parties), but I assume it makes the poster feel good to be outraged and express it by writing something like that.

AMD's valuation increased by over 30% this morning, so to say no one has access to more money because of this news is untrue.

I'm not outraged at all, I just think this sort of bizarre financial engineering is not a good sign. If the ROI was so obvious, why not, for example, simply issue bonds and buy AMD stock on the open market?

If OAI issued bonds, they'd be carrying all the risk. With these deals with Microsoft, Nvidia and now AMD, they're shifting some of that risk to powerful players in the "too big to let fail" category.

Well, yeah, that's exactly my point. OpenAI is not issuing bonds because these transactions are way riskier than people are willing to admit.

Who is “people”? Investors and people familiar with finance are well aware of the deal and its risks, as they are public information.

Do you recall what “people familiar with finance” did with CDOs and mortgage-backed securities during the financial crisis? That didn’t work out so well either, despite all parties being aware of the risks.

It bears repeating my original question: if the risks are so minor, why is OpenAI simply not issuing bonds and buying AMD stock with the proceeds?

I didn’t claim the risks are minor, I am just arguing against the notion of it being “printing money”, as if they have the powers of the Treasury.

> Do you recall what “people familiar with finance” did with CDOs and mortgage-backed securities during the financial crisis? That didn’t work out so well either, despite all parties being aware of the risks.

There was straight up fraud involved in the underwriting for the mortgages where verification (or rather underwriting itself) was not being done.

This deal is a transparent bet on an outcome with no deceived party.

Indeed. Youre one of the few posters ive seen on here that gets it.

I wrote:

> and no one has access to more money due to the contract signed between the two parties

If a third party decides to pay a higher price for a publicly listed share because of the news of this contract, that is not printing money. The buyer of the shares loses money, the seller gains it, for a net change of zero in money supply.

It's not money printing because shares are not classified as money in economics. Money is used for transactions while shares primary purpose is not transactions.

AMD is giving OpenAI chips and 10% of the company? Nice work if you can get it.

openAI is becoming the single point of failure of this bubble .

Who DOESN't have a deal with them

That's by design of course.

Rising tide lifts all boats.

if only they could also anticipate what will happen once the tide is falling

Great: once the bubble pops, all camps will suffer.

Moneyprinter goes Brrrr

robber barons gonna robber baron.

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wow....