A new report on OpenAI’s hardware strategy helped fuel a big rally in AMD stock.
Advanced Micro Devices (AMD 3.96%) stock soared in trading on Tuesday. The company’s stock closed the day up 4% and was up as much as 4.7% at the start of trading.
Reuters today published a report detailing elements of OpenAI’s strategy for using hardware for artificial intelligence (AI). While much of the report focused on the company’s efforts to design new AI chips with help from Broadcom and Taiwan Semiconductor Manufacturing, the report also revealed that the AI leader was buying processors from AMD. also mentioned.
Investors are paying attention to OpenAI
OpenAI is at the forefront of the generative AI revolution and is responsible for software such as ChatGPT, Dall-E, and Sora. The company is a major purchaser of Nvidia’s graphics processing units (GPUs) and also leverages the computing power generated by those GPUs through a partnership with Microsoft. But while Nvidia maintains its dominant position in the advanced GPU market for AI applications, OpenAI aims to diversify and reduce dependence on third-party hardware.
OpenAI is in the process of developing its own in-house AI chip, with support from Broadcom and TSMC on initial designs. Today’s report on OpenAI’s chip strategy also noted that the company was purchasing processors from Advanced Micro Devices. The AI software leader is expanding rapidly and has big long-term ambitions, and its increased infrastructure spending could end up being a big tailwind for AMD.
Is AMD about to win big in AI?
So far, AI hasn’t been the big revenue and profit driver for AMD that some investors had hoped for. Training advanced AI models primarily relies on ultra-high-end GPUs, and Nvidia has a significant advantage in this area. On the other hand, the central processing units (CPUs) used by AMD can be used for AI inference, but demand growth on that front has not been as explosive. High-end GPUs also command much higher profit margins.
As AI infrastructure continues to evolve and expand, Advanced Micro Devices and other processing companies outside of Nvidia could see stronger growth tailwinds. OpenAI’s move to buy more hardware from AMD may already be an early sign of a move in that direction. Additionally, some analysts and industry watchers believe that the demand for AI inference will increase as more applications are built, deployed, and scaled, which could drive demand for CPUs and less powerful GPUs. I predict that. While AMD does have significant AI-related sales opportunities on the horizon, investors should understand that there is still considerable speculation involved in predicting how it will compete in the hardware space. Should.
Keith Noonan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
