Keeping up with all the megabucks deals going on right now in AI land is pretty much a full-time job. But for what it’s worth, here’s another doozy that involves silly amounts of money and a whiff of just the sort of cannibalistic circularity that makes the whole situation so unnerving. AMD and Meta have announced a new strategic alliance in which Meta buys $60 billion worth of AMD GPUs, but also might end up owning 10% of AMD into the bargain, a stake currently valued at around $35 billion.
So, yeah, that’s seemingly $60 billion being paid out by Meta, only to effectively get $35 billion back, along with a whole hill of GPUs for making AI slop. First up, however, it’s worth noting that those dollar figures are estimates. The $60 billion is a Reuters estimate of the cost of what the official announcement explicitly mentions, namely 6 gigawatts worth of AMD Instinct GPUs for AI processing over a five-year period.
As for the $35 billion, that’s based on details in the release and AMD’s current market value. Long story short, if certain stipulations are met, including the number of AMD Instinct GPUs shipped to Meta, and Meta itself “achieving key technical and commercial milestones”, then Zuckerberg’s company has the right to buy up to 160 million AMD shares.
The slightly more detailed version is that if AMD issues all 160 million shares to Meta, that would then represent a roughly 10% holding in the company. Right now, AMD is worth about $350 billion, and the maths is easy enough to see that 10% of $350 billion is $35 billion.
Of course, much can change over the next five years in terms of AMD’s overall value. Likewise, the conditions for the share issue may never be met. But the interesting bit here, arguably, is that those shares will likely be sold to Meta almost for free. According to reports, the price per share is likely to be $0.01, compared to the current market price of over $210 per share.
The reason why AMD doesn’t just give Meta the shares for free comes down to accounting practices and how shares are issued. The $1.6 million Meta would have to pay for the shares is largely incidental. The point is that if the conditions are met, Meta ends up owning about 10% of AMD in return for buying a bucket load of GPUs.
At this juncture, you might wonder why AMD doesn’t just sell the GPUs to Meta more cheaply. Firstly, it makes AMD look less profitable. It would hurt things like AMD’s profit margins and cash flow, which gets the megabucks bean counters at investment banks anxious, and set a real-world price precedent for AMD GPUs below that at which the company would like to sell them.
And in pure PR terms, this kind of deal has better optics than selling the GPUs off cheap to secure Meta as a customer. But that is, arguably, what AMD is doing.
Anywho, for we mere PC gamers, who knows what it all means. It’s positive news for AMD, for sure, but at this stage, any notion of trickle-down economics in terms of AI riches translating into money being made available to invest in creating cool new gaming chips feels a bit hopeful if not downright fanciful.
For sure, we’d rather AMD was doing well than badly. But we’d also rather more of its money came from gaming than AI, as utterly unrealistic as that is.
