AMD and OpenAI partnership makes Nvidia a sought-after challenger in AI chips

In the 1990s, intel Monopolized the PC chip market and was needed by semiconductor manufacturers advanced micro device To exist as a viable No. 2 to avoid being accused of monopolistic behavior.

Almost 30 years later, AMD may be playing a similar role. Nvidiacontrols more than 90% of the market for graphics processing units used for artificial intelligence workloads.

When AMD announced a deal Monday that includes selling billions of dollars worth of GPUs to OpenAI, it declared itself a serious rival that could grab a share of the rapidly growing AI chip market, analysts said.

“NVIDIA has a near monopoly right now, and AMD has a low-single-digit share of the $250 billion market,” said Mandeep Singh, senior analyst at Bloomberg Intelligence, when it comes to AI data center silicon.

To date, Nvidia and OpenAI have defined a new era in AI.

Nvidia’s GPU sales have pushed the company’s market capitalization to $4.5 trillion. OpenAI’s private market valuation has risen to $500 billion due to the popularity of ChatGPT and the company’s ultra-aggressive data center construction plans.

Nvidia is a major investor in OpenAI, agreeing last month to pump up to $100 billion into building the AI ​​startup’s infrastructure.

AMD is a very distant challenger, but the company’s promise in AI and expectations that its GPUs will be enthusiastically embraced by customers also make this stock a darling of Wall Street. But until this week’s OpenAI announcement, AMD’s rally was largely built on hope.

AMD stock soared 24% on Monday, its biggest gain since 2002. The stock is up 89% this year, compared to NVIDIA’s 40% rise.

Nvidia’s control over the fast-growing market was so extensive that it reportedly received a subpoena from the Justice Department last September, during the waning days of the Biden administration, although the Justice Department denied the report. Sen. Elizabeth Warren, D-Mass., sent a letter to the Justice Department’s antitrust division at the time supporting the investigation.

The company’s growth was “fueled by Nvidia’s use of anticompetitive tactics that have stifled competition and chilled innovation,” she wrote. Nvidia said at the time that it would win on merit.

The partnership OpenAI and AMD announced on Monday could change the competitive dynamic.

The partnership is expected to generate “double-digit billions” in revenue for AMD starting in the second half of next year. If the stock reaches its target price over several years, OpenAI could end up owning 10% of AMD.

In a conference call with reporters, AMD CEO Lisa Su called the agreement a “win-win” and proof that the company’s chips are fast and affordable enough to compete with Nvidia’s chips.

He said the OpenAI effort is a “clear signal” that AMD’s GPUs and software provide the performance and economic value “needed for the most demanding large-scale deployments.”

Nvidia CEO Jensen Huang told CNBC’s Squawk Box on Wednesday that OpenAI’s deal with AMD is “unique and surprising.”

“I was surprised that they would give away 10% of the company before it was established,” Huang said.
“I think that’s a smart thing to do,” Huang said.

The agreement also allows OpenAI to demonstrate that its contracts and investments with suppliers such as Nvidia are not exclusive to avoid antitrust implications. OpenAI CEO Sam Altman said on social media that any AMD chip is “incremental” to the Nvidia acquisition and that “the world needs more computing.”

“As far as I can tell, none of these things are exclusive deals that lock the way for other competitors,” said Alden Abbott, a senior fellow at the Mercatus Center and former general counsel at the Federal Trade Commission. “We don’t see any discussions that indicate monopolization or cartelization of AI suppliers in the near future.”

Representatives for Nvidia, AMD and OpenAI declined to comment.

When it comes to Washington, D.C., regulators aren’t the only ones concerned. That pressure appears to have eased this year under the Trump administration’s Justice Department.

Rather, semiconductor investors are concerned about potential tariffs, particularly Section 232 tariffs focused on chips. President Donald Trump said the tariffs, which have not yet taken effect, will double the price of imported chips. But in August, the president introduced a major carve-out.

“If you’re building in the United States, or if you’re committed to building in the United States, and without a doubt, you agree to build in the United States, there’s no charge,” Trump said at the announcement event. apple investment. The Trump administration’s AI Action Plan calls for the United States to export “full-stack” AI technology to become a global standard.

Ed Mills, Washington policy analyst at Raymond James, said it’s not entirely clear what would qualify for the exemption, adding that OpenAI’s investment in AMD could be an “off-ramp” for the company.

Nvidia and OpenAI are already playing a big role in President Trump’s AI ambitions. oracle In January, the president announced Project Stargate, a plan to invest up to $500 billion in U.S. AI infrastructure.

Under the deal with AMD, OpenAI will use the company’s Instinct MI450 system, which is expected to begin shipping next year. This is the first time AMD will offer a “rack-scale” system rather than just individual chips, making AMD the only company other than Nvidia to offer a full stack of AI hardware technology.

“Buying as much as OpenAI is buying from AMD has created a multiplayer race that Nvidia seems to be kind of dominating,” Mills said. “So we are expanding the number of U.S. companies that can compete in producing U.S. technology stacks.”

There is also the issue of China.

Nvidia and AMD both have Chinese-specific AI products that the U.S. government has banned from shipping to the world’s second-largest economy, which is a major hub for AI research. The Trump administration reversed course in the summer, saying the companies could export the chips if they paid 15% of their profits to the U.S. government, but they still needed export permits.

President Trump is scheduled to meet with Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation Conference later this month. Recent reports have suggested that China could commit to $1 trillion in investments in the United States, and Mills said big-ticket AI chips could be part of that deal.

AMD has so far downplayed competition with Nvidia, instead pointing to potential opportunities in AI. The company recently said the AI ​​chip market could reach a value of $500 billion by 2028, and this week said the deal with OpenAI represents at least “tens of billions of dollars in revenue.”

“We didn’t have a chance before, but I think we can get 15 to 20 percent market share in a $500 billion market,” Bloomberg’s Singh said.

The Trump administration may not be too concerned about antitrust issues, but NVIDIA and AMD are in the early stages of what is expected to be a years-long battle, and it’s unclear who will be in the White House after President Trump’s second term ends.

Antitrust regulators have always paid close attention to the market. AMD’s last chip runner-up was industry giant Intel.

The FTC launched an investigation into Intel in 1991 looking into potential anticompetitive practices in the PC market, and AMD filed a $2 billion antitrust lawsuit against the company that same year. The FTC never filed charges, and AMD and Intel eventually settled.

AMD is currently worth about twice as much as Intel. As a result of a series of transactions, Intel’s largest shareholder became the US government, followed by Nvidia.

Spotlight: OpenAI’s series of deals