AMD Takes $1 Billion Hit From OpenAI and Meta AI Chip Deals

What happened

AMD recorded a $1 billion noncash charge in the third quarter as it began accounting for stock warrants granted to OpenAI and Meta alongside chip-supply agreements. The adjustment was reflected in GAAP diluted earnings of $1.46 per share; AMD said it would not affect non-GAAP earnings or free cash flow.

Confirmed

Global impact / market context

The charge lowers reported GAAP earnings without reducing cash available, so investors may distinguish accounting results from the company’s cash generation. If the warrants are eventually exercised, AMD would issue more shares, spreading ownership across a larger share count and potentially reducing existing shareholders’ percentage stakes.

Analyst inference

The warrants link AMD’s accounting costs to the progress of its chip-supply deals: AMD expects quarterly fair-value adjustments, meaning changes in the estimated worth of the warrants, to rise as shipments and agreements advance. The ultimate share dilution depends on performance milestones and exercise conditions.

Analyst inference

What to watch

1. AMD said it expects quarterly fair-value adjustments to increase in subsequent quarters as it ships MI450-series graphics processors and the agreements with OpenAI and Meta advance. Confirmed
2. AMD plans to provide further guidance in 2027 on when warrant vesting and exercise requirements may be reached; watch for details on milestone timing and conditions. Confirmed
3. Track whether the warrants are exercised, because issuing shares would increase AMD’s share count and reduce existing shareholders’ ownership percentage, even though the charge itself is noncash. Analyst inference

Evidence

• gurufocus.com