AMD grants OpenAI, Meta 160 million share warrants at one cent

AMD's decision to tie equity to processor purchases is a structure that aligns customer and shareholder interests. The warrants vest only as OpenAI and Meta deploy up to six gigawatts of AMD capacity each, meaning AMD hands over shares only after the hardware revenue is booked. The final OpenAI tranche also requires a $600 share price, a threshold already cleared at $655.90 on October 6.

The scale of the potential dilution is significant. At AMD's $1.07 trillion market capitalization, 320 million shares represent roughly $210 billion of value for $3.2 million. The company's defense is that twelve gigawatts of processors between the two buyers is an enormous order, and the equity is the discount attached to it.

Whether this trade pays off hinges on margins the vesting does not guarantee. Operating margin is 17.25% and net margin 15.58%, modest for a company priced at 167.32 times trailing earnings, with enterprise value to EBITDA of 106.93. The balance sheet is not the constraint, with debt of $4.28 billion against $13.11 billion of cash. Ultimately, the arrangement is designed to extend AMD's recent 50.10% quarterly revenue growth, but it only pays off if OpenAI and Meta keep deploying at scale.