Advanced Micro Devices has struck a major agreement to supply artificial intelligence processors to Meta Platforms in a multi-year arrangement that could reshape the competitive balance in the AI hardware market. The deal covers chip deliveries worth up to A$92 billion over five years, with the overall value potentially exceeding A$153 billion depending on future commitments.

As part of the agreement, Meta will have the option to acquire up to 10 per cent of AMD through a share warrant structure tied to performance targets. Following news of the partnership, AMD shares climbed nearly 9 per cent to close at the equivalent of A$327. Meanwhile, Nvidia, which remains the dominant force in AI chips, saw little movement ahead of its earnings announcement.

The surge in global demand for AI accelerators has intensified rivalry among semiconductor companies. Technology groups are racing to secure reliable chip supply as data centre expansion accelerates. In recent years, large-scale agreements between chipmakers and AI developers have become increasingly common, with companies seeking both supply stability and strategic alliances.

Under the new arrangement, AMD will deliver six gigawatts of AI processing capacity to Meta. Initial shipments will include one gigawatt of the forthcoming MI450 processor beginning in the second half of this year. A single gigawatt of computing power is estimated to be sufficient to supply electricity to roughly 750,000 homes, illustrating the scale of infrastructure involved.

In addition to its flagship graphics processors, AMD will provide central processing units tailored to Meta’s requirements. One custom variant is expected to prioritise high performance while limiting energy consumption, with two generations of AMD CPUs included in the supply plan.

The MI450 has been designed with a focus on inference workloads, which involve generating responses from trained AI systems such as chatbots. This segment of the market is projected by analysts to outpace the hardware required for initial model training. The new processor will compete directly with Nvidia’s next-generation offerings.

Meta contributed input into the development of the MI450, particularly around optimisation for inference tasks. AMD chief executive Lisa Su said the collaboration reflects Meta’s ambition to accelerate its AI roadmap. She added that the company intends to deploy the full breadth of its technology portfolio to support Meta’s objectives.

AMD chief executive Lisa Su

The financial structure of the deal includes a warrant for 160 million AMD shares, issued at an exercise price of one cent. The warrant will vest progressively as AMD’s share price reaches escalating milestones up to A$920. Each stage is also subject to technical and commercial conditions that Meta must meet.

While Meta is committing heavily to AMD, it has indicated that it will continue sourcing chips from other suppliers and developing its own in-house silicon. The scale of its data centre buildout requires multiple vendors and architectural approaches, according to Santosh Janardhan, Meta’s head of infrastructure.

The agreement comes at a time when major technology firms are pouring substantial capital into AI infrastructure. Combined capital expenditure from companies including Alphabet, Microsoft, Amazon and Meta is projected to reach at least A$965 billion this year, with the bulk allocated to data centres and AI processors.

Some market observers have raised concerns about increasingly intertwined relationships between chipmakers and their largest customers, suggesting that cross-investments and supply agreements could complicate competitive dynamics. Nevertheless, the scale of AI investment shows little sign of slowing.

For AMD, the partnership represents a significant endorsement of its next-generation hardware as it seeks to narrow the gap with Nvidia. For Meta, the move secures substantial processing capacity while diversifying beyond a single supplier, reinforcing its long-term AI strategy in an intensely competitive market.