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Oct. 6 (UPI) — The S&P 500 and the Nasdaq closed at record highs Monday after ChatGPT-maker OpenAI and Advanced Micro Devices reached a mega-deal that ignited a rally, despite the U.S. government shutdown entering its second week.

Chipmaker AMD shares closed 23.71% higher as the tech-heavy Nasdaq Composite rose 0.71% to end the day at a new record high of 22,941.67. The S&P 500 gained 0.36% to close at 6,740.28. Despite record closes for the Nasdaq and S&P, the Dow Jones Industrial Average dropped 0.1%.

AMD, one of Nvidia’s key rivals, announced earlier Monday it had agreed to a multi-year deal to supply chips to OpenAI, which could end-up taking a 10% stake in the chipmaker.

“Excited to partner with AMD to use their chips to serve our users!” Sam Altman, OpenAI co-founder and chief executive officer, wrote in a post on X.

“This is all incremental to our work with NVIDIA (and we plan to increase our NVIDIA purchasing over time),” Altman added.

Nvidia announced last month it would invest as much as $100 billion to help power OpenAI’s new AI models. After Monday’s news of the AMD-OpenAI deal, which boosted tech stocks and optimism for AI, Nvidia’s shares closed down 1%.

“The AI narrative continues to gain momentum,” said Louis Navellier, founder and chief investment officer of Navellier & Associates.

The deal “gives some competition for NVIDIA, which currently dominates AI chips, and accelerates the timeline for data center buildouts,” Navellier added.

OpenAI said it will deploy 6 gigawatts of AMD’s Instinct graphics processing units across multiple generations of hardware for the next few years. The first 1-gigawatt rollout of chips is expected to take place in about a year.

“We have to do this,” OpenAI president Greg Brockman told CNBC’s “Squawk on the Street.”

“This is so core to our mission if we really want to be able to scale to reach all of humanity, this is what we have to do.”

Since the advent of artificial intelligence (AI) in early 2023, Advanced Micro Devices (AMD 25.63%) has been something of a wild card. The increasing demand for graphics processing units (GPUs) that can handle the rigors of AI has been unparalleled, but not all AI chipmakers are created equal.

There’s no denying that Nvidia (NVDA -1.13%) has been the biggest beneficiary of the accelerating adoption of AI, given its status as a market share leader in the data center space, where most AI processing occurs. Nvidia has ridden this unprecedented demand to new heights, becoming the largest publicly traded company in the world when measured by market cap.

While Nvidia stock has soared 1,180% since the dawn of AI, AMD stock has only risen 154% during the same period (as of market close on Friday). The company has been working diligently to stake its claim in the windfall that is AI.

Shareholders were elated when AMD announced a groundbreaking deal with OpenAI that could be a game changer. As a result, the stock gained 30% Monday morning (as of this writing) — and that could be just the beginning.

Image source: AMD.

Far-reaching strategic partnership

OpenAI is largely credited with kick-starting the AI revolution, thanks to its development of ChatGPT, the generative AI system that took the technology to the next level. In a press release that dropped Monday morning, AMD announced a far-reaching strategic partnership with OpenAI.

Under the terms of the multiyear, multigenerational agreement, OpenAI will install 6 gigawatts of AMD GPUs. The rollout will begin with 1 gigawatt of AMD Instinct MI450 series chips and rack-scale AI solutions in the second half of 2026. Beyond simply supplying GPUs, AMD will work side by side with OpenAI as a “core strategic compute partner” to create future generations of AI chips optimized for AI applications.

The companies noted that the partnership began with the MI300X and continued with the MI350X series of chips. Many experts believe these processors are a competitive alternative to Nvidia’s advanced AI chips at a lower price, making them ideal for use with the large language models that underpin generative AI.

Perhaps the most eye-opening development is that, as part of the agreement, AMD has issued OpenAI a warrant to purchase up to 160 million shares of AMD stock — equal to a roughly 10% stake in the company — contingent upon the company achieving specific share price targets and OpenAI reaching certain technical and commercial milestones.

The first tranche is scheduled to vest on the completion of the deployment of the first gigawatt of GPUs, with additional milestones at the completion of each successive gigawatt.

Is this deal a game changer?

In many cases, saying a deal is a game changer is hyperbole, but in this case, I don’t believe it’s an exaggeration. In its recent financing deal, OpenAI was valued at roughly $500 billion, making it the world’s most valuable start-up. Furthermore, the company has quickly ascended the ranks to become one of the largest buyers of high-end AI-centric chips as it works to development its next-generation AI systems.

Assuming things go as planned, this deal provides AMD with a relatively secure revenue stream that the company estimates will be worth tens of billions of dollars. For context, the company generated revenue of nearly $26 billion in 2024, which helps to illustrate the magnitude of the opportunity.

Furthermore, this deal acts as a ringing endorsement for AMD’s processors. For potential buyers of AMD chips sitting on the fence, this could be the catalyst for taking the plunge and adopting the company’s AI solutions.

Some investors have been concerned that the adoption of AI will hit a wall, but there’s simply no evidence to support these assertions. Furthermore, estimates regarding the addressable market for generative AI continue to climb. Big Four accounting firm PwC estimates the market could be worth as much as $15.7 trillion annually by 2030.

If AMD can carve out just a small piece of that massive opportunity, today’s stock price move could be just the beginning. Furthermore, at roughly 35 times next year’s sales, AMD stock is attractively priced relative to the burgeoning opportunity.

Shares of Advanced Micro Devices (AMD -5.53%) were taking a dive today in response to an analyst downgrade, calling out weakness in its artificial intelligence (AI) division.

In addition, the stock may have reacted negatively to a downbeat employment report, as well as a new threat about tariffs on semiconductors. Finally, reports came out showing that OpenAI was planning to make its own AI chips for the first time, which could threaten suppliers like AMD and Nvidia.

As a result, the stock was down 6.3% as of 11:28 a.m. ET.

Image source: Getty Images.

AMD gets dinged

The main reason for the sell-off today was a downgrade from Seaport Research, which lowered its rating on AMD from buy to neutral, noting that supply chain checks indicated slowing growth in its AI chip business.

Other reports seemed to add to those worries, as the August employment report showed that just 22,000 jobs were added last month, a sign of slowing economic growth.

Additionally, President Trump said again that his administration would impose tariffs on semiconductor imports for companies not moving production to the U.S. It’s unclear if that policy would affect AMD, which is based in the U.S., but as a fabless chip company, contracts with foundries like TSMC for production. The uncertainty around the move may be weighing on the stock as well.

Peers such as Nvidia, the leading AI chipmaker, also fell today, though that may be in response to a Financial Times report that OpenAI will begin production of its own AI chips for the first time, limiting reliance on outside partners like Nvidia and AMD.

What it means for AMD

Seaport’s report of slowing growth in the AI business is the most concerning news item, as AMD has positioned itself as the No. 2 company in AI GPUs, though it’s well behind Nvidia.

AMD reported strong sales of its Instinct Mi350 AI accelerators in the second quarter. At this point, the boom still seems healthy after Anthropic’s valuation doubled to $183 billion earlier this week, but investors should keep their eyes out for any other reports of AI weakness at AMD.

President Trump struck an unusual deal with Nvidia and Advanced Micro Devices that allows the companies to sell certain chips to China in exchange for giving the U.S. government a 15% cut of those sales.

But the unprecedented agreement also has raised concerns from politicians and legal experts over whether the deal is legal and would pose a national security threat.

Questions also linger about exactly how the deal, which was announced Monday, would work because the U.S. Constitution bars taxes on exports, although some experts said Trump could find a workaround.

The U.S. government might receive $3 billion from the revenue split if China’s demand for Nvidia’s H20 chip — which is less powerful than the company’s highest-end artificial intelligence chip — reaches $20 billion, according to a note from Bernstein Research.

“It ties the fate of this chip manufacturer in a very particular way to this administration that is quite rare,” said Julia Powles, a professor and executive director of the UCLA Institute for Technology, Law & Policy.

Trump’s agreement with the world’s most valuable company could put pressure on other tech companies and major exporters to strike similar deals with the U.S. government, but it’s still unclear what the implications will be internationally, she said.

The deal is the latest example of how tech companies are seeking to curry favor with the Trump administration, which has threatened to impose tariffs on semiconductor companies that don’t commit to investing in the United States.

Apple faced potential tariffs as well, but committed to investing $100 billion more in U.S. manufacturing after Trump criticized the company for expanding iPhone production in India.

Trump also placed restrictions in April around the export of certain AI chips, including Nvidia’s H20 and AMD’s MI308, over national security concerns.

He’s called for the resignation of Intel Chief Executive Lip-Bu Tan, who has faced scrutiny over his reported investments in Chinese companies, but changed his tune after meeting the executive this week.

Democratic and Republican lawmakers have criticized the idea that tech companies should split their sales with the U.S. government in exchange for export licenses that allow them to resume chip sales in China.

“Export controls are a frontline defense in protecting our national security, and we should not set a precedent that incentivizes the Government to grant licenses to sell China technology that will enhance its AI capabilities,” Rep. John Moolenaar (R-Mich.), the chair of the House Select Committee on China, said in a statement.

Rep. Raja Krishnamoorthi, (D-Ill.), a ranking member of that committee, said in a statement that the deal raises questions about its legality and how the funds will be used.

“The administration cannot simultaneously treat semiconductor exports as both a national security threat and a revenue opportunity,” he said. “By putting a price on our security concerns, we signal to China and our allies that American national security principles are negotiable for the right fee.”

The White House didn’t answer questions about the agreement. White House Press Secretary Karoline Leavitt told reporters Tuesday that “the legality of it, the mechanics of it, is still being ironed out by the Department of Commerce.”

On Monday, Trump defended the deal with Nvidia, stating that the H20 chips are “obsolete” and less powerful than the company’s more high-end Blackwell chip. At a news conference, Trump said he met with Nvidia CEO Jensen Huang and initially asked for a 20% revenue split but they came down to 15%.

“We negotiate a little deal,” Trump said. “So he’s selling a essentially old chip.” Trump’s remarks came after a report from the Financial Times over the weekend that Nvidia and AMD would pay 15% of their China chip revenue to the U.S. government. AMD didn’t respond to a request for comment.

An Nvidia spokesperson said in a statement that the company hasn’t shipped H20 chips to China for months but it hopes that easing export restrictions will “let America compete in China and worldwide.”

“America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race.”

For Nvidia, the stakes are high. Huang said in a May interview with Stratechery, a newsletter and podcast, that the Chinese market is about $50 billion a year. Restricting H20 chip sales means that the company is walking away from profits that could be used to compete with China in the race to dominate AI.

Taylar Rajic, an associate fellow at the Center for Strategic and International Studies, said she’s skeptical that legal concerns would halt the arrangement because it’s unclear who would sue.

“I can’t identify who would bring that suit forward,” she said. “It wouldn’t be Nvidia because they’re the ones who negotiated this deal.”

Meanwhile, Chinese officials have their own fears that Nvidia’s chips could have location tracking or remote shutdown capabilities, though the company has denied those accusations.

“China obviously has its own concerns and its own national security considerations that it wants to take into account,” Rajic said. “It just depends on whether or not they want to buy it from us too.”

Aug. 11 (UPI) — U.S. chip makers Nvidia and Advanced Micro Devices inked an “unprecedented” deal in which they will pay 15% of their sales to China to the U.S. treasury in exchange for export licenses to ship their advanced H20 and MI308 semiconductors.

The administration of U.S. President Donald Trump has begun issuing licenses to both companies to supply the AI chips to China, sources and officials told the BBC and the Financial Times on Sunday, after Nvidia CEO Jensen Huang met with Trump last week.

The arrangements came two months after Trump reversed an earlier decision banning Nvidia from exporting its H20 chip to China, with the Santa Clara, Calif., firm moving to cut the deal because the Commerce Department’s Bureau of Industry and Security had not issued the expected licenses.

Nvidia developed the H20 chip specifically for the Chinese market after the administration of President Joe Biden imposed sweeping export controls on advanced chips for AI in 2023. Before Trump’s ban, analysts estimated Nvidia would ship 1.5 million H20s this year, worth $23 billion.

AMD, which is also headquartered in Santa Clara, did not immediately comment on the development, but Nvidia said it always adhered to U.S. regulations when it came to exporting and warned of the risk of the U.S. losing its first-mover advantage.

“We follow rules the U.S. government sets for our participation in worldwide markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”

Saying the development was without precedent, Forrester Vice President Charlie Dai said it demonstrated very elevated market access costs in a climate of rising tensions in global trade, generating “substantial financial pressure and strategic uncertainty for tech vendors.”

The deal, which takes to a new level Trump’s tactic of using trade restrictions to pressure multinationals to invest in the United States or shift manufacturing there, has attracted criticism from security experts who called the H20, in particular, a “potent accelerator” of Chinese AI that would help its military and erode the United States’ lead in the technology.

“If you have a 15% payment, it doesn’t somehow eliminate the national security issue. You either have a national security problem or you don’t,” said Deborah Elms, trade policy head at the Hinrich Foundation, a think tank.

BIS officials have also raised concerns along with 20 security experts who wrote Commerce Secretary Howard Lutnick asking him not to authorize licenses to export the H20.

“Chips optimized for AI inference will not simply power consumer products or factory logistics; they will enable autonomous weapons systems, intelligence surveillance platforms and rapid advances in battlefield decision-making,” the letter said.

Nvidia earlier dismissed the claims regarding China’s military and that the H20 would help Chinese AI to leap forward.

But Liza Tobin, China expert and National Security Council member in the first Trump administration, warned against monetizing the transfer of dual-use technology.

“Being must be gloating to see Washington turn export licenses into revenue streams. What’s next — letting Lockheed Martin sell F-35s to China for a 15% commission,” she told the FT.

Trade experts express concern about reported deal linking exports controls to monetary payments.

Nvidia and AMD have agreed to give the United States government a share of revenues from chip sales in China as part of a deal to secure export licences for their products, US media have reported.

Under the agreement reached with US President Donald Trump’s administration, Nvidia will share 15 percent of revenues from sales of its H20 AI chip, while AMD will pay the same percentage of MI308 chip revenues, multiple outlets reported on Sunday.

The unorthodox agreement, which has no known precedent, comes after the Trump administration last month agreed to reverse a ban on the sale of Nvidia’s H20 chips to China.

The Financial Times, which first reported the news, said the Trump administration had yet to decide how it would use the collected revenues.

AMD did not respond to a request for comment.

Nvidia neither confirmed nor denied the deal, but said it follows US government rules for doing business in overseas markets.

“While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,” a company spokesperson said.

“America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race.”

Following reports of the deal, which was confirmed by The New York Times, Bloomberg, The Wall Street Journal and the BBC, trade experts expressed concern about the implications of linking controls on sensitive technology to monetary payments.

Christopher Padilla, the former head of the US Commerce Department’s International Trade Administration, called the agreement “astonishing”.

“If the Trump administration is allowing companies to buy their way past export controls imposed to protect US national security, we are in very dangerous waters,” Padilla said in a post on LinkedIn.

“A mix of bribery and blackmail that is certainly unprecedented and possibly illegal.”

Peter Harrell, a nonresident fellow at the Carnegie Endowment for International Peace, said the deal set a worrying precedent.

“The Chinese would pay a lot for F35s and advanced US military technology, too,” Harrell said in a post on X.

“Regardless of whether you think Nvidia should be able to sell H20s in China, charging a fee in exchange for relaxing national security export controls is a terrible precedent.”

Chip giants Nvidia and AMD have agreed to pay the US government 15% of their semiconductor sales in China, the BBC has been told by a source close to the matter.

The agreement is part of a deal to secure export licences to the world’s second biggest economy.

“We follow rules the US government sets for our participation in worldwide markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,” Nvidia told the BBC.

AMD did not immediately respond to a request for comment.

In a statement to the BBC, Nvidia also said: “America cannot repeat 5G and lose telecommunication leadership. America’s [artificial intelligence] tech stack can be the world’s standard if we race.”

Under the agreement, Nvidia will pay 15% of its revenues from H20 chip sales in China to the US government, while AMD will give the same percentage from its MI308 chip revenues, which was first reported by the Financial Times.

Washington has previously banned the sale of Nvidia’s H20 chips to Beijing over security concerns, although the firm recently announced that this would be reversed.

The H20 chip was developed specifically for the Chinese market after US export restrictions were imposed by the Biden administration in 2023. Its sale was effectively banned by the Trump administration in April this year.

Nvidia’s chief executive Jensen Huang has spent months lobbying both sides for a resumption of sales of the chips in China. He reportedly met US President Donald Trump last week.

The resumption of chip sales to China comes as trade tensions between Beijing and Washington have been easing.

Beijing has relaxed controls on rare earth exports, while the US has lifted restrictions on chip design software firms operating in China.

In May, the world’s two biggest economies agreed to a 90-day truce in their tariffs war.

Since then, top trade officials from both sides have met on a number of occasions, although an agreement to extend the tariffs pause has not yet been confirmed ahead of a 12 August deadline.

As part of his tariffs policy, Trump has put pressure on major companies to make more investments in the US.

Last week, Apple said it would invest another $100bn (£74.4bn) in the country, adding to a previous pledge to spend $500bn in the US over the next four years.

In June, memory chip maker Micron Technology said its planned US investments will total $200bn. That includes construction of a new manufacturing facility in Idaho.

Nvidia itself has announced plans to build AI servers in the US worth up to $500bn, pledging to build the first AI supercomputers that are entirely American-made.