Advanced Micro Devices Secures OpenAI Deal to Supply Hundreds of Thousands of GPUs with 10% Warrant
AMD signed a multi-year agreement with OpenAI to deliver hundreds of thousands of GPUs starting later this year, alongside a warrant granting OpenAI up to a 10% equity stake if milestones are met. Management expects AI data center revenue to grow at an 80% CAGR versus a 40% market rate.
1. Breakthrough OpenAI Partnership
In October, AMD secured a landmark multi-year agreement to supply OpenAI with hundreds of thousands of AI GPUs, underscoring the company’s credibility in the data-center market. The deal includes a warrant allowing OpenAI to acquire up to 10% of AMD’s equity upon achievement of performance milestones, reflecting strong confidence from one of the fastest-growing AI developers. This agreement alone is expected to contribute more than $10 billion to AMD’s revenue over its duration and cements the company as a strategic supplier alongside industry incumbents.
2. Accelerating Revenue and Earnings Growth
After posting a modest 5.6% compound annual revenue increase over the past three years, AMD is projected to accelerate top-line growth to 34% per year through 2028, driven by surging demand for AI compute capacity. Analysts forecast adjusted earnings per share to expand at nearly 50% annually, with EPS growth estimates of 65.5% in 2026 and upside scenarios exceeding 80% this year. Annual sales are expected to rise by approximately 32% in 2025, supported by robust uptake of AI-optimized processors and data-center accelerators.
3. Margin Expansion Opportunity
Despite a net margin of 10.3% last year, considerably below peers who report margins above 50%, AMD demonstrated improvement with a 13.4% margin in Q3. Management anticipates that increasing scale in AI data-center deployments and higher-value product mix will drive net profits above 30% by mid-2027. CEO Lisa Su highlighted that global compute demand could increase 100-fold over five years, offering significant leverage to further expand profitability as fixed costs are spread over a larger revenue base.
4. Path to a $1 Trillion Valuation
With a current market capitalization of $414 billion and a one-year gain exceeding 120%, repeating this performance would push AMD toward the $1 trillion mark. Assuming a forward earnings multiple of 68 times and continued execution on growth targets, consensus models project a share price that would translate to a valuation above $1 trillion in late 2027 or early 2028. Even a 10% share of the expanding AI GPU market could be sufficient for AMD to cross this milestone, making the trillion-dollar target achievable within the next two to three years.