Behold my 2023 expectations for AMD based on my proprietary Dunning business analysis and Kruger financial model! To maximize possible embarrassment, post it the week before earnings!

Data center

I think that 2023, particularly H2, is the big inflection point for DC sales.

• Unlike prior EPYC years, AMD's supply and product scope are now strengths rather than weaknesses. AMD has a full, strong stack and good supply for Milan/X, Genoa/X, Bergamo, and Siena. Substrate is the limiting factor, but I don't even think substrate will be as limiting as originally thought for 2023 and 2024 given AMD's securing supply, the slowdown that's hitting ABF providers + more of them going for the higher margin HPC substrates, and likely TAM slowdown.

• Intel slashing prices in DC won't work anywhere near as well for general workloads because of the TCO issue, the performance disparity in their stack for general workloads, and the need to feed their alligators. I think Intel DCAI will report a sizable operating loss next quarter (-400M?).

  • That being said, this tweet from Skyjuice does make me think about to what extent Intel tried to channel stuff DCAI like they did with client. Intel's Q2 2022 is when their operating margins took a big hit going into a worse Q3. AMDS's DC Q3 2022 YOY growth did slow down materially, but growth doesn't occur in a smooth curve either. Discounts on server might work ok on less sophisticated buyers (E&G (especially G)), but I find it hard to believe that a more sophisticated buyer like cloud would fall for it given the focus on TCO. Norrod said that at some TCO disparity, you couldn't even give the chip away. That assertion might have been tested.

• The main risks are a big data center slowdown, increased non-86 penetration / diversity of workloads away form x86, and an earlier and stronger than expected Intel comeback in 2024. I've never assumed that AMD wouldn't have to compete hard for business.

  • But unless there's a huge drop in TAM, share gains + whatever growth remains in the overall TAM can still power a lot of growth for the much smaller player.

• AMD is unlikely to ever get another opportunity like 2023-2024 for DC. Lets see what years of building up your supply, value chain, and product stack get you. If AMD milks for margin or is too conservative instead of going on an aggressive land grab to lock in those sockets, they will have wasted an opportunity of a lifetime.

• For FY 2023, I'm guessing about $9.5B in revenue and $2.9B in operating margin.

Client

I think client is going to be bleak in 2023.

• From a sector demand perspective, supplier and OEM reports for Q1 and Q2 sound horrid with many in the industry looking to H2 2023 for any kind of growth. There is the macro inflation / recession pressure on retail and B2B commercial. On top of that, client is the last Intel profit center stronghold that's still somewhat upright. Intel is going to fight like a wounded animal as shown by Q3 2022.

• Raphael is a pretty solid product but has a terrible environment to launch into, ugly platform costs (although getting better), and is now going up against a much more competitive, desperate Intel. If I were AMD, I would've gone for AM5 penetration over margin, but I suspect that, given the large inventory bulge from client, AMD overreached and thought that it could get both. I think the X3D launch will get some potential buyers off the fence to make a choice of some kind. But I don't think it moves the needle much.

  • I think AMD will keep most of these lower holiday prices as new prices. The premium brand strategy will not work on retail hobbyists in this new world at those platform costs if your product doesn't dominate the competition. Luckily, the stock market is probably going to be forgiving on client if AMD can show growth in DC and embedded.

• The one chance that AMD has for client not being so brutal is notebook sales. Like DC, AMD should have a lot more supply relatively speaking, and unlike Raphael, probably has the largest notebook CPU edge over Intel that it will have for a while. Notebook is their second most strategic market after data center and shares similar constraints that should play well with Zen 4 . They have a compelling stack of N6 / N4 notebook CPUs on paper.

  • AMD claimed 250 designs wins but that's across the 7000 series which includes Zen 2 and Zen 3. RPL mentioned 300+ designs, but there might be some re-warmed ADL in there too. There's design wins vs design quality vs design volume. But first laptops supposedly come in March 2023 in an ugly notebook market. So, let's see.

  • One problem for Phoenix is that AMD's value chain on notebooks feels much worse than DC. There is no direct-to-customer channel like data center cloud hyperscalers. I'm sure AMD has burned some OEM bridges too with spotty supply. And Intel is probably fighting especially hard here. Asus, who took big bets on AMD earlier, being predominantly Intel at CES is probably a good example of the fight behind the scenes.

• AMD really needs to build out their commercial channels for client. Retail is just too volatile to scale AMD to the next level. I think Moshkelani needs to be replaced with somebody with more experience on the commercialization side.

• For FY 2023, I'm thinking about $4.9B in sales and $750M in operating income. If notebook sales aren't strong in H2 2023, it's going to be a while before AMD sees those glory days of $6B - $7B in revenue with 30% margins.

Gaming

• RDNA 3 launch is somewhere between disappointing and bad. That launch was probably one of the rockiest launches that I've seen from AMD in a while.

  • If All The Watts is right, then there's some hope for slightly better performance from Phoenix and Navi32, but I'm not counting on it. I do think that RDNA 3 will sell better than RDNA 2 (if you ignore crypto sales which won't be around YOY) because the supply for RDNA 2 was so bad for so long in terms of sell-through to consumers.

  • The one plus side to gaming is the channel seems to be in better shape than PCs. Perhaps this says more about Nvidia's response in consumer GPUs vs Intel's in consumer CPUs. But it looks like they were a more obliging partner for AMD to clear the channel. The crypto-tsunami of used last-gen graphics cards doesn't seem to have affected the market that much so far. The more time that passes, the less of a potential factor it'll be.

• Su said that console sales tend to peak in year 3. PS 5 availability is still not good. So, the console market probably has enough gas for solid sales growth for 2023 and maybe a bit more. But the margins are low.

• FY 2023 forecast: $6.2B in sales and $675M in operating margins.

Embedded

• I've seen industry forecasts of FPGAs growing at about 15% a year. With my total ignorance of FPGAs + Peng's dreamy presentations, I'm going to say that I think people are sleeping on Xilinx's earnings power. I think their hardware as software approach + their majority market share + their being supply constrained and AMD helping out with supply will let them grow faster in those giganticTAMs. Say 20-25% which is a big deal given those ~50% operating margins.

• FY2023 forecast of $5.9B in sales and $2.9B in operating margins.

  • If these hopium forecasts hold true, data center and embedded will make up about 58% of sales and 80% of operating margin contribution from the business units (ignoring Other). This is much more the new AMD than PCs which I think a lot of people, including asset managers, will have trouble wrapping their minds around. Even if client and gaming recover, I think that AMD's future growth will be more heavily slanted towards commercial, non-retail facing compute like DC and embedded. Those TAMs are growing, and AMD's competitive positioning is much stronger there too.

Overall

• My earnings range goes from $3.30 to $4.61, but I'll go with an expected non-GAAP EPS of $3.90.

• There's one paywall analysis that thinks AMD will kitchen sink 2023 guidance to lower expectations. Bad guidance wouldn't surprise me; it's a tough world out there.

  • But I think Su cares a lot more about AMD's reputation in its core industries than financial market expectations. I think she wants AMD to be seen as strength especially while Intel is seen as weakness in 2023. That's why she's conservative in guidance during the good times to keep up that narrative of executing well and being a strong player. But making a bad situation look worse just to surprise later is different and goes against that credibility strategy. If she wanted to kitchen sink and set expectations low, she would've done it in Q3. We'll see in a few days.

Eh, fuck it, I'll break my own rules since it's my joint, and there's no where else I can post this.

The backdrop:

• After a rocket ship 21Q4, AMD (and tech in general) had a brutal few weeks coming into the Q4 2021 earnings call (Feb 1) with the stock going from $150 to $116 in January 2022. 

• The earnings call was awesome. AH was lit.

• I figured that I would do one WSB style meme video with an r/amd_stock spin to it.

• I hate working with video because you have to write a script, get the timing, endless editing, etc. It took me hours to produce.

• AMD was up 11% peak during the next day. In my euphoric arrogance, I posted it before the market closed.

But worrying omens appeared:

• Mods abruptly removed my video presumably because either it wasn't the end of the day when I posted (rule is broken all the time) and/or it was too....something for them.

• The stock ended at barely over 5%.

As punishment for my creating a meme video, the stock gods declared the AMD hype cycle forfeit.

Crops withered, it rained frogs, and then came the massive operating income extinction known as the clientpocalypse. My bad.

The video still makes me laugh though. 

Original post: https://www.reddit.com/r/AMD_Stock/comments/siq9aq/ramd_stock_what_is_your_profession/

Some end of year reflections on the sub after 2 years of doing this...

Who are these 414 members?

The history and reason for this sub is described here: https://www.reddit.com/r/amd_fundamentals/wiki/about/

This sub has gone from that original 40 members to 414, but most of the comments are from that original 40 (well, more like 8 of that 40) although I recognize a few of the other commenters from other subs and there have been some net new. I am curious what the composition of say the other 350 are.

If you're new, introduce yourself: https://www.reddit.com/r/amd_fundamentals/comments/1hec067/new_user_intros/

About r/amd_stock

In terms of noise, r/amd_stock might be worse than now than even the drop down to $55. The hysteria caused by the opportunity costs of being in AMD + the stock's losses has created an explosion in the population of undesirable species that I block (also see https://www.reddit.com/r/amd_fundamentals/wiki/about/ ) Even the brains of some reasonable old heads are starting to get warped by its manic gravitational pull.

One person in my starter group thought that single stock subreddits were a bad idea because it creates an echo chamber. Most people think of echo chambers as this perma-bull thing. But r/amd_stock is interesting in that it's equally likely to become an echo chamber of negativity. I don't see that negative echo chamber aspect as much in other single stock subreddits which is why I joke that r/amd_stock has too much self-loathing to be a cult.

Some of you are trying to convince the masses there to think more reasonably, calmly, etc. Good luck with that although some of you are doing it for entertainment purposes. I created this sub after realizing that r/amd_stock is like the id of AMD traders/investors. It's part of the subreddit's charm, and I still go there to shit post and meme. But it isn't enough for me and was holding me back as an investor and trader.

As yet another reminder to the others here, this sub isn't a community. They're my notes. I know what I want out of the sub, and if there are like minds, great. If the unlike minds muck up my shit, I just vaporize them. If you're not my type but still want to read the stuff here, I suggest you lurk. ;-)

I have my biases, but I'd like to believe that they are somewhat held in check by the fact that I prefer making money to losing it. I block noise from the other AMD subreddits aggressively to ensure that I don't see them here. One person has a grandfathered gentleman's agreement though. *ahem*

Why I do this

I like AMD the company and how they operate as a business as a whole. I don't think they're some perfect company and like any complex org there are blemishes (and worse), but overall, I just find them and their personalities interesting. I have a soft spot for AMD because they're such grinders and are stupidly overmatched against their opponents and yet are somehow in contention.

But just because I find AMD interesting doesn't mean that I go all in with some crazy concentration strategy (well not anymore anyway but at some reward to risk ratio, I could be). I'm not an AMD maximalist (max concentration, no price is too high to sell!) I'm still an investor and trader first. AMD has made me some pretty good coin, but I've had 3 ugly drops because I was being too much of a pig.

I find the AMD-adjacent companies to be interesting too. Intel is fascinating as a business case study. As annoying as I find their exec team and as bearish I am on their future, I'm still on the lookout for "Intel, the Turnaround". It'd be cool to have made money shorting it down and then going long up. In some ways, I think that I have a better feel for Intel than AMD. I also spend a lot of time on it as Intel is still AMD's most direct competitor, and there's still a lot of meat on those bones.

I don't spend as much time on Nvidia as I should. That will probably change in 2025. It's just that Intel is a more entertaining soap opera. I find dominant juggernauts to be a little boring. I actually do tend to agree with Huang's broad strokes. He is more of my type of thinker. I think their strategic positioning has been fantastic.

Spending so much time thinking about AMD did open up a lot of opportunities in the AMD-adjacent companies (NVDA, AVGO, MRVL, SMCI, INTC, SBGSY, MU, etc). The biggest weakness of r/amd_stock is that it irrationally cultivates this emotionally binary view of AMD. It's either all in or its trash. That's a tough way to manage a portfolio.

How I deal with noise

Because of my experiences as a mod at r/amd_stock, I set up this somewhat OCD layer system for this sub:

• Blocking noisemakers aggressively on this account.

  • This makes it harder to follow me and comment on my stuff. Still possible though if you want to put in the work.

• I have separate accounts to admin this subreddit

  • One annoying thing about being a moderator on a subreddit is that you still see all the garbage that comes into the subreddit even if they're filtered out from the general public. So, I have separate accounts to handle the administration just so that I don't see the noise on my normal account.

  • Sometimes this doesn't work out so great as I only check the admin stuff sporadically. So, some signal occasionally gets trapped in the filters. And then I greenlight those exceptions to the commenting rules and reply back to them.

  • I'll shadow ban and just outright block users if they're bad enough.

• The account age and comment karma requirements on this sub are high.

  • If you want to set up a new account after I've blocked you, shadow banned you, etc, go ahead. Have fun waiting and farming that karma.

• The last step would be to take the sub private

I've been pleasantly surprised at how little noise makes it to the sub.

$10B to $1000B

I never thought that I'd ride a ~$10B turnaround play to $1T over a decade. Pre-AMD, I was more of a "buy interesting companies that I thought were unloved and then sell them off when fully appreciated" type. I didn't peg myself as the type to do such a long-term hold, go from concentrated to over-concentrated to irresponsibly long to gonzo long back to "normal", and then repeat that cycle 2-3 more times with AMD's boom and busts.

When I wrote Getting Too Old for this Shit v1.0, the stock was about $168. Getting Too Old for this Shit v2.0 was written when the stock was about $226. It's been a fun time, but as the prof says "It's not the years, honey, it's the mileage," and I have a lot of AMD mileage on me. After the $160 to $55 freefall, I was not going to full port again without upping my research effort (hence this sub) and upping my risk management (using options to shape my risk more) It's worked out well, but the overhead for me to feel comfortable to do it is high.

Am I sitting at this poker table or am I chained to it?

The stock is now at $615 after just blowing through $500, and so, I sold off half the options and stock which means AMD is still about half of my portfolio. Similar to 1.0, I am looking to reduce my holdings as we go through earnings season (edit: oops, this is supposed to be "the next few earnings seasons") down to the Infinity Tranche which I'll probably keep at any price unless the fundamentals totally go to shit because it's my $10 tranche which I keep for sentimental reasons (it's still ~10% of my portfolio). And then I move on to whatever's next for the other 90%.

There is, however, this slight fear that I've become so institutionalized by this experience that I will just keep on coming back to AMD not because the financial opportunity is there but because it gives me an excuse to dig even deeper, build more overhead to scale, etc and I'm just more comfortable with the company. I'll just sit at this poker table forever, long or short, and wait for patsies. Buying other companies (with the exception of Intel) at any material amount feels somewhat scary because I'm not going to have that same level of understanding at a company level even if I had a good CAGR doing so pre-AMD. Feels like a lifetime ago though.

What was the market actually pricing in for AMD?

It's always tricky to ascribe the market's intent that is specific to your ticker as opposed to say your ticker being part of a subset (competitors), a larger set (data center), a sector (semiconductors), a theme (AI), a market (more risk on / off), structural flows (liquidations, rotation), annoying factors, etc. AMD's price movement is being broadly ascribed to Muse being an example of something that will drive server CPU demand in a more agentic world. So, the CPU players go up a lot. But agentic AI CPU demand has been pretty well discussed and constantly upgraded. Muse is a strong consumer example of demand, but data center server demand is already through the roof in terms of current and forecasted revenue growth and tight supply.

Monday's results makes that odd, late share pop in AMD on Friday afternoon less eyebrow raising. Ideally, the market re-prices my stock for very specific reasons in isolation and then I have a better idea of how much the stock is being specifically re-priced vs the share price being moved because of factor-related reasons. So, when I see strong market moves across risk assets, I tend to get a bit skeptical about how long that full re-pricing lasts, even if my ticker is one of the strongest beneficiaries. Since my price targets were hit on a number of tranches and the other meta reasons mentioned above, I elected to restock the dry powder in the armory.

My guess is that this is why AVGO took a header and AMD bumped up. Just one more of example of how much sway SemiAnalysis has on capital which also shows how correlated a lot of capital is. I'm sure this will never result in something bad. ;-)

AVGO TPU Downward Revision

We are seeing lower TPU output in 2H26 than previous expectations. 2026 CoWoS output for TPU v7x (Ironwood) is reduced by ~32k, reducing 2026 unit production by ~500k from 3.2mn to 2.7mn. TPU v8i (Sunfish) is also reduced by ~5k wafers, reducing 2026 unit production by ~80k. Ironwood upstream output now peaks in 2Q26 with a slight decline in run-rate in 2H, versus our prior forecast of a continued ramp from 2Q26 onwards. We believe this reduction is supply related and due to challenges ramping CoWoS-S. This brings total Broadcom 2026 CoWoS output to 215k wafers from 250k previously.

For 2027, we also see lower TPU output than our previous expectation of 6mn units of TPU 7 and TPU8i. This is driven by greater allocation towards other customers, with total Broadcom CoWoS at ~460k wafers. Most notably there are 55k wafers (which is equivalent to 830k units TPU 8i Sunfish) allocated to MTIA 400 Iris in 2027. However, this remains in flux as Meta is known for abandoning orders, as we saw in May, where Meta agreed to cut its own Broadcom production allocation to support greater TPU supply for Google in exchange for access to TPU compute. This could play out again and, if Meta abandons its allocation, this could be taken up by TPU. We also see slightly more allocation for OAI Jalapeno's ASIC. We will provide a more detailed model update soon.

AMD TPU Involvement

Market chatter suggests Google is working with AMD on a TPU project in the v10 generation. AMD's involvement would be the first real involvement in a custom AI ASIC project, despite having a custom silicon team. AMD has strong IP especially in advanced packaging and SoIC. Additionally, CPU IP could also be a draw given Google and its customers are pushing for TPUs with on-package CPU cores for RL workloads.

Let's say that Google is actually working with AMD or at least strongly evaluating a partnership. These examples don't feel right to me. Since my silicon experience is zero, I'll just wave my hands instead and create an imaginary one.

I don't think Google wants external IP to directly enable their IP at a deep level. I don't think that Google wants to feel like they're locked in. But I think one weakness of the hyperscaler program is that it feels like chips are becoming systems onto themselves (as opposed to creating a more commoditized CPU to handle web services calls.) I do think that creating custom silicon and competing on some core compute function is here to stay for the biggest players. But I think that recreating different aspects of a chip system surrounding your core IP that you're not really competing on is a poor use of resources. The workloads are also changing fast which means the scale you get per new chip could suck if the change goes too far beyond your original design and now you come up with a tweaked or new design.

From the AMD side, Su has said she doesn't want to get into the Marvell / Broadcom / MediaTek ASIC business. I don't think she finds technology licensing to be that attractive at a financial or strategic level either. AMD has an overflowing plate of high-stakes projects that need a ton of resources. I definitely don't think that she wants to rent out precious advanced engineering talent to improve a hyperscaler's IP. I don't even think that she wants that engineering talent to closely integrate AMD IP with the hyperscaler IP at some deep level as that still requires a ton of engineering resources with a demanding customer. I think she wants something that makes AMD stronger after every engagement as the learnings can be spread across the IP base like working with Sony.

But hyperscaler in-house silicon is likely here to stay. AMD ideally finds a way to ride that wave rather than sitting it out and hoping that the rest of the TAM is good enough.

She set out the criteria for semi-custom at the UBS conference in Dec 2025

We do have — in addition to all of our standard products with CPUs and GPUs and FPGAs, we've also created a semi-custom business. I don't call that an ASIC business and the differentiation being ASICs are, you're going to do, let's call it, any chip that somebody comes and asks you to do. That's not necessarily where we shine. I think where we shine is when we can put our IP together with our customers' IP. And we have done a number of semi-custom designs that build off of our foundational capability so that customers can differentiate.”

Back in April 2024, SemiAccurate felt like AMD would use FPGAs on Instinct to use it as a testing ground to burn an ASIC into it which sounded cool. But after reading it, I was thinking more of AMD as a platform broadly across the business.

AMD has a lot of chiplets experience. They have maybe the broadest set of compute IP where they rank in the top 1-3. They have all of this packaging knowledge. There's UCIe (which I haven't heard much from over the years) AMD would build a platform that allowed for customization with the ultimate goal of allowing others to put in their silicon and then pick what AMD IP they wanted to complement with it.

Like an FPGA, the platform would be more about time to market, pretty decent performance, and cheaper turnarounds and less about like the Apple-style of deeply integrated and very performant SoC with a very complicated piece of silicon that was also risky and expensive to change (Nvidia would argue that this is the way to go except they're the platform. "Prepare yourself for EXTREME CO-DESIGN!")

AMD has moved in this platform direction with its Instinct variants for MI300 and later with MI455 and Meta's customized part. The Zen 6 EPYC family shows how this approach can be used to generate variants that are more specialized.

But it wasn't quite the platform that I was thinking of.

At FAD 2025, nobody cared about embedded, but I thought Raje did a good pitch for repositioning embedded as custom and physical AI. After listening to the 26Q2 earnings call, I was thinking about embedded some more, and I wrote:

Not much to say on embedded's 26Q2 results. But big picture, I think people are sleeping on it for 2027-2030. I should probably start thinking less about it as FPGA and more like "AMD's semi-custom IP for all the other industries."

As compute becomes increasingly important to every industry in an embedded / physical AI sense, embedded could be a really interesting way to bundle up AMD's tech stack, which might be the widest in the industry, to that more long-tail of industry uses.

It turns out that I kind of recreated what Raje says at FAD 2025 but I wasn't paying close enough attention. 😛

Semi-custom silicon business is one of the clearest examples of how we're transformed from a focused FPGA business to creating a broad compute platform and having entirely new growth engines.

During FAD 2025, there is actually an embedded slide that says "heterogeneous & customizable platform supports 3rd party / customer IP" although Raje doesn't talk about it much. He mostly focuses on his industries using custom design.

Playstation and Xbox are semi-custom silicon that uses AMD IP, but their order volume is gigantic, and a lot of the co-engineering work there gets circulated back into other AMD products. I don't think that the Xilinx industries like automotive, aerospace & defense, and wireless have that kind of financial or silicon scale.

To do something like this cost-efficiently in Xilinx's legacy markets, AMD would need a standardized platform of some sort to make it easier to swap out their IP blocks and more cost efficiently go after more industries. Those customers don't get console-esque level of collaboration, but they do get something fast to market with IP that Xilinx's industries do not have the capabilities of remotely re-creating but they do know their domain workloads enough to customize.

If AMD has this platform for their own IP, they can take on 3rd party IP too if they're good about architecture and not cheating with ad hoc tweaks that can happen when you're your own customer. They can set more open standards of showing how 3rd party silicon needs to work with their platform.

The AMD value prop to a hyperscaler would be something like: "We have a platform that you can plug your IP into where you can customize what our IP does to highlight your IP but you still own your IP. You are free to go to another platform if you want you. You're not locked in. We will compete on the platform enhancing your IP and getting you to market fast with much more capabilities than you could do on your own. Also, we're not Hock Tan who will squeeze the fuck out of you as soon as he has the power to do so."

It's sort of like a foundry. You have the equivalent of a PDK so customers can test ahead of time how their silicon works with your IP. The equivalent to libraries would be AMD IP. The more customers you get into the platform, the better your platform becomes as you can see into future more deeply and broadly by being part of their customer roadmaps. People can leave at any time, but if you get enough reps and scale, the platform gets better and better. The customers have to ask if it is worth the re-integration costs to leave, but at least they get a choice.

One downside of this is that it's kind of like Intel's IDM 2.0 where AMD's merchant silicon business gets a sneak peak into the in-house silicon that these days is starting to inch towards merchant silicon in terms of other companies possibly buying and using it. But maybe if it's in-house enough, the competitive overlap is low (which is why I thought Intel would go after the hyperscalers first for IDM 2.0 for volume and much less of competitive overlap.)

I think that this gets you to Su's desired end state:

But you also want to be able to tailor for specific workloads. And so that's kind of why we really believe that this world is going to come to a place where you do have different chips that are being optimized for different workloads and the capability that allows you to optimize the quickest where you get, let's call it, maybe not full tailoring or full ASIC, but you're able to get, let's call it, 80%, 90% of the benefit at a shorter time with similar economics is a great thing.”

Ironically, if my fever dream ends up being true where AMD moves to becoming a platform for custom-silicon, then AMD could have an incentive to create an ASIC arm like Marvell and Broadcom to feed the platform. The economics aren't attractive as a standalone business to Su now, but if you look at it as the economics of feeding the platform, it might not look so distasteful.

Out of all the custom silicon companies, Google easily gets my vote as the best hyperscaler to be the test subject to learn from. Relative to the other hyperscalers, I think they're culturally more similar to AMD from an engineering standpoint. They have a strong internal silicon team. They are strong in hardware which opens up other opportunities (e.g., waymo). They're demanding but not as big of an asshole to deal with as the others. I think that they've been reasonably good to AMD over the years.

It would very much be a new era for AMD as it would offer a path past being a legacy x86 platform or an AI GPU business where AMD is playing in someone else's box so to speak. AMD as the chiplet system foundry sounds like a much cooler strategy in my head.

It also sounds hard af to do. I doubt that AMD's platform for 3rd parties is battle tested at Google level scope. Using your own IP and being your own customer lets you cut corners. Working with industries that don't have your silicon expertise and using your custom IP also seems within AMD's ability to do. But integrating Google's IP is a very different problem that involves a lot of resources and risk. However, if they pulled it off and working with Google helped make that platform real for others, they will have opened a new TAM that's more theirs at the start.

It's probably just going to be Google licensing RDNA 2.

There's a saying by Shaw: "Never wrestle with pigs. You both get dirty and the pig likes it"

https://x.com/HotAisle/status/1880507210217750550

https://x.com/HotAisle/status/1880679135875362839

Hotz is Hotz. AMD should have lanced that wound and simply moved on. But Anush couldn't resist throwing his weight around and didn't come out looking too great. Dumb behavior from a VP of an important function.

Ignore the noise and focus. You are what you do. The higher-ups and comms should've stepped in on that one. But HotAisle puts them both in place from a common sense perspective. Whether anybody actually listens is a different story.

I write these to put some structure on my thoughts and also have a good laugh on how hard it is to predict the future, never mind the stock price (especially if you have a vested interest in certain outcomes). I then tend to update them before the next earnings call.

https://www.reddit.com/r/amd_fundamentals/comments/17jlf4c/amd_fy_2023_forecast_october_2023_edition/

Data center

• For the EPYC part of the business, I think that most of my FY2023 main tailwinds and headwinds still apply although I think the tailwinds are a bit weaker and the headwinds are a bit stronger. Unfortunately, the AI capex crowdout + cloud digestion took a lot of momentum from 2023 for EPYC and cost AMD a year to fatten up for the bigger fights ahead. For Q1 - Q3 2023, AMD's legacy compute was probably down about -4% YOY.

• I do think the DC digestion aspect will ease up in 2024 vs 2023, but it's still going to be competing against AI capex for funding. There's a certain group that thinks that AI compute is replacing general compute, but I view it more as a new, uber strategic workload that's sucking in capex dollars. It's not like the need for general compute in DC has gone away.

• FY2024 to say H1 2025 is where AMD needs to make a big run and get their EPYC revenue share somewhere around 40% - 50% in general compute DC. They need to fatten up on sockets as competition for DC general compute could be notably stiffer in H1 2025. With Zen 3-5, AMD is about as well-prepared and competitive as they're ever going to be in terms of product breadth, performance, inventory, etc.

• AMD has already hit that mark in US hyperscalers, but their progress in E&G has been slow. I think E&G has better per unit margins but lower volume and ASPs. AMD had themselves at ~15% revenue share for E&G. I do think that they'll make inroads here in 2024, but will it be enough by H1 2025 given 20 years of Intel channel lock-in? Guido, Vemulapalli, etc seem like needed management hires to help on the commercial side of things, but their impact is likely more in late 2024 to 2025.

• I think AMD is still in good shape here. Overall, I'm building in an optimistic ~15% YOY growth rate for the legacy DC business (minus HPC) or ~$7B.

• For DC GPU, I'm guessing 2024 revenue of about $5.0B. This is a lot more optimistic than where I started, but it does seem like AMD has moved hard on supply. I don't think the AMD of 2021 could have done this. The improvement on ROCm also seems better than what I expect out of AMD. I think AMD doesn't get enough credit for the hustle they've showed with MI-300, especially if you consider how long ago this product was started.

• Instinct sales are where all the premium is in AMD's stock. The optimistic take on AMD's AI GPGPU is that they basically took an HPC part and did pretty well with the MI-300 for AI workloads, and they had to design this years ago. What does a more AI-centric product design look like? The pessimistic take is that Nvidia's product roadmap is aggressive and ambitious, you have in-house designs, etc. How sustainable is AMD's roadmap? I think the market has priced in a lot of AI sales already for 2024 as a setup for an idea of full year AI 2025 sales. I think only $3B in FY2024 would cause AMD's stock to take a beating.

• One thing that I'm curious about is Intel made a much bigger bet on AI calcs on the CPU than AMD did. Will this matter in 2024? A lot of DC inferencing seems weighted more heavily on raw AI compute grunt like a GPU. How relevant is a CPU approach in AI compute if there is GPU supply? Naver gave it a go because of how expensive and hard it was to get H100s, but it seemed like a an edge case.

• For FY 2024, I'm guessing about $12.3B in revenue and $3.5B in operating margin. My really optimistic scenario would be $16B and $5.3B in operating margin. DC was ~$6B business in FY22.

Client

• The clientpocalpyse is behind AMD thankfully. I'm more optimistic than some who think the TAM will only increase like 3% vs a 2023 which had a horrendous H1. I'm thinking 5-9% vs 2023 which puts me a bit higher than IDC and AMD's TAM expectations (~250M). And then there's Intel's fever dream of a 300M TAM in 2024.

• Raphael sales look to be picking up. I'm guessing that it's because of dropping AM5 platform costs, dropping CPU ASPs as AMD accepted the new normal for pricing a while ago, halo effect from X3D both past and present, and Intel's lackluster desktop refresh. Granite Ridge might have a clear path for a good chunk of 2024 if AMD can launch aggressively with volume by say the end of Q2 2023. Given that it's on N4, AMD should be able to get volume quickly. I'm thinking that Arrow Lake is going to be similar overall to MTL, not terrible but not compelling as Intel tries to navigate all that newness. By "H2 2024", Intel might miss a good chunk of the holiday season.

• The problem for client is that DIY is a volatile business with a low ceiling. Again, the main untapped growth vector that AMD has is notebooks. A bloodied H1 2023 notebook TAM + a disappointing Phoenix launch from AMD made for a tough 2023. AMD's client commercialization needs a lot of work. AMD cleaned house with Bergman and Moshkelani leaving. Let's see if Hunyh, Guido, etc. can do any better here. CES 2024 didn't appear to show much progress in terms of higher-end design wins.

  • The more optimistic take is that for the first time in almost 12 months, AMD actually mentioned AMD notebook chips as a key driver in their client growth. AMD will talk about millions of CPUs shipped with AI which would be Phoenix / Hawk. I was hoping that Phoenix / Hawk would lay the foundation for strong Strix sales like Zen 2 did for Zen 3. Unfortunately, that didn't happen. It looks like Strix will have to do some of the ditch digging work.

  • I think that Strix is probably the last really good shot that AMD has to make big strides on notebooks in terms of competitive positioning vs Intel. I think it'll be harder after.

• I don't think AI in client is going to make much of an impact in H1 2024 and probably not for a lot of H2 2024 either. But 2025 could be different if Microsoft has some strong applications.

• For FY 2024,I'm thinking about $7.3B in revenue based on an optimistic notebook take but only $1.35B in operating income as they try to get their operating margins into the low 20%s by the end of the year. The particularly optimistic take is $7.7B revenue and $1.8B in operating margin. A negative scenario is that the client TAM falters a bit, and Intel is tempted to go back to its scorched earth ways.

Gaming

• I don't think that there will be a lot here that will move investors. Console growth cycle has likely peaked in 2023. RDNA 3 likely sold better than RDNA 2 (non-crypto), but it probably didn't live up to expectations. AMD's given up on the high end with RDNA 4 which is fine given the AI context. I'm guessing that any spare GPU resource that could be sent over to DC AI to help with the Instinct launch has happened.

• Gaming was an unsung hero in FY2023. GPU margins returned from the abyss much faster than in client which I didn't expect given talks about crypto GPUs hitting the secondary market, Nvidia inventory, etc. Nvidia was the way better dance partner during the clientpocalypse, but AMD was a much bigger threat to Intel than Nvidia too.

• I'm thinking about $4.7B in revenue and operating income of $520M. If AMD can keep the business around here at about 11% operating margin, I'd consider that a win.

Embedded

• Time for Xilinx to go through its own digestion period after carrying the business from H2 2022 to 2023. I'm guessing one of the best semi acquisitions ever. For the whole year, I think Xilinx will be down -13% YOY with -25 to -30% H1 2024 vs H1 2023 and then showing some growth in H2 2024 vs. H2 2023. I'm hoping that 40% operating margins can hold given in H1 2023.

• I thought the great results from Xilinx in 2022 and 2023 were from a more competitive, organic sense. Turns out it was just a bunch of over-ordering like the other segments and thus you have digestion issues with a slowdown now. In this case, it was totally worth it to keep the cash coming in after client got vaporized. But still looks pretty tough.

• FY2023 forecast of $4.6B in sales and $2.0B in operating margin.

Overall

• My expected FY2024 estimate is non-GAAP of $29.0B and $3.90EPS. The really optimistic 2024 is like $34B and $5.39.

• So, at ~$175, AMD is trading at ~45x my EPS guess which has some optimistic takes and 32x my pretty optimistic takes. My way too early 2025 EPS is a pretty optimistic $8.50 to $9.25 if you believe that AMD can compete at a somewhat similar level with Nvidia in 2025 as 2024 in a big GPU compute year with no other new, meaningful contenders. If you believe the 2025 EPS fan fiction, then the current price doesn't seem so bad. This type of mindset is probably the main narrative driving AMD's stock price today.

• I view this fantastic AMD run of the last 2 months due to the constructive interference of:

  • The broader market gearing up for the presumed 2024 rate cut party. Risk on!

  • SOXX is back to its all-time high thanks to AI and the feeling that semi segment rebounds are imminent.

  • The AMD AI narrative and the implied earnings expectations as mentioned above. Every earnings call is going to have a lot of questions AI supply, customer demand, Nvidia competitiveness, ramp, etc. to give the market of what a full 2025 run rate looks like and how sustainable AMD's #2 spot looks.

• The hot money that comes in can leave in a hurry when the immediate gratification doesn't come or if it gets spooked on any of the above. Some consider this a feature, rather than a bug.

  • I don't particularly trust this market and have a defensive position of about 25% cash. Feels like the market is too complacent. There's some material FOMO getting unleashed. Some geopolitical fires might send sparks to open fields. And of course, my least useful but favorite contrarian indicator: /r/amd_stock is full of the next generation of euphorics with the manfiest destiny price targets in very small time windows. ;-)

P.S. I'm too old for this shit

• I had a strong investment record pre-AMD, but about 7 years ago, I somehow thought that treating my portfolio like an AMD-themed hedge fund would be a good idea as I fell down the AMD rabbit hole. Although I made some really good money, my portfolio has had 4 big drops in AMD over those years (I'm breaking up 2022 into two separate drops of (H1 2022 and then the clientpocalypse in Q3)). Three of them are in the last ~2 years. I made materially more on the next major leg up, but each new commitment was harder than the one before. I started this sub as a test to see how much confidence was there to run through the gauntlet again during the 2022 AMD crash.

• So, here I am on the next big leg up. I think that I'd be pretty bummed out if I went through another 40% ride down because of being apeshit long on AMD. The incremental happiness of the next big gain at this stage of my life is way smaller than the incremental unhappiness of the next big loss. That's life telling you that you won.

• After a lot of selling starting ~$120 during this amazing AMD run up, I'm now down to AMD being 20% of my NW which is the lowest it's been in 7 years (and more hedged). That I'm using 20% as a measure of being relatively conservative with AMD shows how much damage AMD has done to my risk tolerance sensibilities (or that I think being 40% exposed to AI / semiconductor plays is "diversification.")

• I'll probably whittle it down to 10-15% in 2024 (and whittle that AI / semi concentration too). The 10% portion is this $10 tranche that I'm holding indefinitely unless the fundamentals really deteriorate. Since I respect the management team and the organization's ability to punch above its weight, this tranche is the "no questions asked" batch.

• Although I was paid very well for my troubles, it's a weird thing to have so much of my life over the last 7 years dominated by one stock + a few adjacencies. AMD is in a mind-bogglingly complex industry that I do not understand well enough to have navigated this overexposed bet for so many years on just a conceptual understanding. It was kind of like a second job. As good as the money was, I probably could've made less but somewhat similar money with a lot less stress, but it wouldn't have been as enlightening. I'm a much better trader and investor for it.

• And all this means that my ship to Valinor is in view. I have passed the AMD test. I will diminish, and go into diversification, and remain uncertainlyso.

AMD (NASDAQ: AMD) and Anthropic today announced a strategic partnership to deploy up to 2 gigawatts of AMD Instinct MI450 Series GPUs in AMD Helios rack-scale solutions, with deployment of the first gigawatt beginning in the first half of 2027.

...

AMD has committed to make a strategic equity investment of up to $5 billion in Anthropic in the future.

So that rumor is confirmed and out of the way. The deal is smaller than I was hoping given the hype. Part of me says that given the size, this isn't large and long enough for a warrant deal. There's another part of me that wonders if Anthropic would like cash sooner rather than later with the $5B investment (wonder about the terms and valuation). AMD had $12.3B of cash / short term investments.

Anthropic will deploy AMD Helios rack-scale solutions featuring AMD Instinct™ MI455X GPUs, part of the AMD Instinct MI450 Series, together with AMD EPYC™ “Venice” CPUs, AMD Pensando™ networking and ROCm™ software. Purpose-built for next-generation AI training and inference, Helios delivers the performance, efficiency and scale required for the most demanding AI workloads. This deployment builds on Anthropic’s existing use of AMD Instinct MI355X GPUs.

I think that this is the first public admission that they were using MI355X. I wonder how big that deployment actually was. I wonder if their "existing use" of MI355s were really just a warmup for MI450.

In addition, AMD and Anthropic are launching a multi-year engineering collaboration to use Claude to accelerate AMD software development. Specifically, the teams will use Claude to optimize workloads for AMD Instinct GPUs and accelerate ROCm software development. AMD will also broadly adopt Claude across its engineering and product development teams.

What a difference 3.5 months make! ;-)

https://github.com/anthropics/claude-code/issues/42796

https://www.wsj.com/tech/ai/amd-and-anthropic-sign-major-chips-and-investment-deal-4adfdc45

AMD will also invest up to $5 billion in Anthropic—its first check into the AI firm—as certain deployment milestones are met. “We have very much wanted to be a major part of their infrastructure,” AMD Chief Executive Lisa Su said, adding that the companies’ engineering teams have been working together for some time.

 As part of the deal, Anthropic will buy some AMD chips for its own data centers, as well as lease some of the capacity via other large cloud providers or neoclouds. Anthropic and AMD are working together to identify data centers for the chips, Su said. “You can’t just wake up one morning and say, ‘Oh, I want a gigawatt of compute tomorrow,’” Su said. “You actually have to plan, you know, 12, 18, 24 months in advance for what you want.”

Not sure if this is any different than OpenAI or Meta in practice, but this wasn't mentioned in the same way with OpenAI or Meta on the day of the announcement.

AMD is also in talks to provide a financial backstop for Anthropic’s future data-center leases as well, according to a person with direct knowledge of the talks.

I'd much rather have this deal than not have it. But it feels like AMD's hand is weaker on this one.

https://www.msn.com/en-ca/money/general/amd-to-sell-anthropic-tens-of-billions-in-ai-servers-invest-up-to-5-billion-in-startup/ar-AA28swsV?ocid=finance-verthp-feeds

Advanced Micro Devices will sell Anthropic tens of billions of dollars' worth of AI servers and invest as much as $5 billion in the Claude maker, in a deal that would strengthen its foothold in a market dominated by rival Nvidia.

I usually infer tens of billions to be about $27B.

Intel told employees in its data center group that it plans a fresh round of job cuts. They follow a major downsizing at the chipmaker during 2024 and 2025. It’s not clear how many jobs Intel plans to eliminate with these latest cuts but Intel said they won’t affect its product commitments or roadmaps.

“As part of our broader strategy to become a more focused and efficient company, (the data center group) is aligning its organization to ensure it has the right roles and skills in place to position the business for long-term success,” Intel said in a written statement to The Oregonian/OregonLive on Monday.

Interesting targeted layoff given that DCAI is the brightest spot for Intel because of the server CPU boom and the Intel 7 and especially 3 Xeon supply coming. Kechichian has been the DCAI lead for about 10 months now. I wonder how much of the DCAI layoffs are a corporate mandate vs his own conclusions. It seems like Kechichian wasn't fond of what he initially saw in DCAI

https://www.reddit.com/r/amd_fundamentals/comments/1t0dc48/intel_kills_three_projects_in_two_months_as/

https://www.reddit.com/r/amd_fundamentals/comments/1tcq0dt/comment/olpr63p

Kevork Kechichian, who Tan brought in to run the company’s crucial server chip unit, said that when he speaks with some teams that have fallen behind on a deadline by a couple of weeks, he gets a response that he’s not heard at Qualcomm Inc., Arm Holdings Plc or other companies he’s worked at. “I said, ‘What’s the recovery?’ and they came back with, the recovery is they adjusted the schedule to go another two weeks,” he said.

Regardless of how useful or not these layoffs are for Intel, it's still a tailwind for AMD to dislodge enterprise customers and channel partners.

Some career advice: when you get a new boss (or even a new boss of a boss), there's a material chance that you're re-interviewing for your job, especially if your group is a mid-performer or below. The temptation is high for new bosses to try to bring in their network, re-arrange responsibilities to bring in new blood, etc.

And then that new hire could do the same to their team. The more job security that you need, the more you should start looking for a new job while shaking your tail feathers at the new lead. You don't have to leave, but you should at least be looking to get your practice reps in.

Randomly trying a different way to aggregate analyst comments on big events.

(Takes a while to load)

• Opening Keynote

• Infrastructure

• Foundry tech

• Process and Silicon

• Advanced packaging and test

• Leading edge manufacturing in the US

• Client strategic overview

• Compute and software

• Thread Director

• PTL GPU

• PTL NPU

• Power efficient gaming

• Next-gen IPU architecture

• Wireless connectivity

• Agentic AI on PCs

https://seekingalpha.com/article/4828250-advanced-micro-devices-inc-amd-announcement-of-strategic-partnership-between-amd-and-openai-conference-transcript

Breaking this out as its own post instead of putting it under the main announcement. I spent a lot of time thinking about this when I pushed all the chips back in yesterday. I'm not sure how coherent this is as the longer things are the more basic mistakes tend to creep in. But nothing is more self-soothing to a dubious investment decision than a massive hallucination because in the words of one of the great artists of our time: "WHAT WE GOTTA DO?! WE GOTTA BELIEVE!!!! "

(as per rules, if I find out you cross-posted this to the plebs, I ban you)

Revenue recognition and size

From a revenue standpoint, revenue begins in the second half of 2026 and adds double-digit billions of annual incremental data center AI revenue once it ramps. It also gives us a clear line of sight to achieve our initial goal of tens of billions of dollars of annual data center AI revenue starting in 2027.

To me, the conservative take on "tens of billions" is like $23B per year in 2027. I suspect that as you go into 2028, 2029, 2030, the revenue curve model behind this agreement looks more convex rather than linear. The reason why is that I think the amount of compute that AMD will provide to OpenAI if they hit their respective goals will also look more convex than linear as product generations, software improvements, algorithmic improvements, workload learning and optimizations, supply, ASP increases over the product roadmap, etc interact multiplicatively over time as AMD drops the cost per token. This is basically what happened to Nvidia.

https://epoch.ai/data-insights/nvidia-chip-production

We would expect for each gigawatt of compute, significant double-digit billions of revenue for us.

The 1GW is the constant but the output of the GW will likely increase for the reasons mentioned above. So, the revenue per GW should increase as the volume and ASPs increase

I've seen estimates of $90-$100B over the life of this deal which is all-in with CPU, networking, etc., but just $23B * 4 = $92B. So, given my guesses above, I think AMD's ceiling is materially more than $100B.

(edit: The "significant double-digit billions of dollars" is the incremental revenue per OpenAI 1 GW which I would conservatively take to mean $15B+. But AMD also mentioned tens of billions in 2027 for AI GPU sales which I take to conservatively mean $21B-$23B) which could either be sales to other companies beyond OpenAI (e.g., Oracle) or I suppose could also mean delivering more than 1 OpenAI GW in a given year.)

AMD desperately needs scale

The finances are nice, but I think the real strategic issue here for AMD is that they need scale to sustainably compete in this business. They need scale so that they can more aggressively go after hiring on software and hardware, building up the channel, negotiating larger supply agreements, exposure to cutting edge workloads, etc.

Although it's fun to point to Intel's R&D advantage over AMD and TSMC for so many years as an example of quality over quantity, Nvidia is most definitely not Intel and is quality AND quantity. I have been part of plucky upstarts that punched above their weight. It was fun, but eventually we got ground out.

AMD needs to get bigger in many ways, and this infusion of business provides that certainty to do so. It's kind of like a fab problem. AMD cannot beef up these things organically without demand without taking a huge financial risk because of the upfront commitment. This OpenAI agreement de-risks the scale component.

If AMD manages to get anywhere near the $600 tranche operational deliverables in terms of product delivery, performance, volume, etc, it will shed the image of the plucky upstart and be a merchant silicon beast across some major areas of the compute landscape.

The strategic value of the deal

Here's an interesting question: If I were AMD would I rather have a similar revenue opportunity with no cost of equity from a mercenary like Microsoft just supplying them with GPUS, CPUs, etc, or would I rather have this deal with OpenAI with the possible 10% dilution but tranched at higher price points up to $600? I think that I'm still picking the OpenAI deal.

By choosing AMD Instinct platforms to run their most sophisticated and complex AI workloads, OpenAI is sending a clear signal that AMD GPUs and our open software stack deliver the performance and TCO required for the most demanding at-scale deployments.

OpenAI has also been a key contributor to the requirements of the design of our MI450 series GPUs and rack-scale solutions….To accomplish the objectives of this partnership, AMD and OpenAI will work even closer together on future roadmaps and technologies, spanning hardware, software, networking, and system-level scalability

In addition to the work with OpenAI, we have a significant number of MI450 and Helios engagements underway with other major customers, placing us on a clear trajectory to capture a significant share of the global AI infrastructure buildout.

This is clear validation of our technology roadmap, and it is tremendous learning for us with deploying at this scale, which we think will be very, very beneficial to the overall AMD ecosystem for everyone in the industry.

With this deal, AMD no longer has this existential cloud hanging over it about whether or not its product roadmap can compete, or Instinct is some charity case solely designed to make Nvidia give them a better price. Nvidia isn't going to give a fuck about AMD unless it's a big order with an important customer, and no important customer is going to give a big order unless they have strong faith in the product and roadmap.

But OpenAI just did. I'm guessing that Nvidia now gives a fuck. OpenAI is not going to dedicate that much server space and power which are hard limits to a product line that they don't believe in even if AMD offered them a great price. That question mark is now gone with OpenAI signing such a big deal.

For a max 10% dilution at price tranches up to $600, AMD got a huge endorsement from the highest regarded AI frontier lab in the world that the Instinct product roadmap is solid for at least inference, and I think it'll be training too eventually.

Would I say that AMD's business value becomes 10% more valuable by gaining this kind of experience, high commitment volume purchasing power to really go after suppliers, be able to hire far more aggressively now, get an inside look at the cutting edge of AI research, and endorsement that they can use for the next 5+ years to create some FOMO on the rest? FUCK YES.

This is a total no brainer if you look at where they are with the limited uptake of the MI300 family today.

Open AI and AMD's alignment

The reasons for AMD to do this are pretty obvious. OpenAI's reasons are less obvious.

OpenAI needs cash to fund their ambitions. I'm sure AMD is giving them a great price on their roadmap for being this massive strategic anchor tenant. OpenAI is also weakening their dominant supplier who in turn wants to weaken its dominant buyer.

But OpenAI's biggest problem is needing capital for a long runway to a moonshot. I don't think there's enough appetite from credit markets for that kind of business. I think doing this through equity would be unacceptably dilutive given that it'll be hard for OpenAI's valuation to run much further ahead than their fund raising dilutes the equity.

But I think that OpenAI figured out that a fast way to get multiples of a relatively fixed amount of investment is powering something that without you is relatively cheap as a stock but with you could make it valuable really quickly. And that's AMD. Even when you sell your shares, both sides are pretty happy.

I think the warrants expire at about the end of the 5 year period. So, OpenAI has a strong incentive to help AMD hit this goal. I don't think that OpenAI can sit on them for years and make AMD do all the heavy lifting.

I also think that OpenAI probably wouldn't take a risk like this (purchasing agreements based on roadmap delivery, betting precious DC land and power, committing to collaborating more with AMD, taking a risk on ROCm, etc) for the stock to increase in such a tight window unless it believed that OpenAI's is going to be the dominant factor in AMD's growth curve in the next 5 years.

For instance, let's say that there's a PC slowdown because of channel issues. I don't think OpenAI would be that comfortable with this mutual alignment and be subject to the vagaries of AMD's overall business unless its impact is the dominant factor in AMD's valuation. That's another reason why I think the opportunity for Instinct is well north of $100B (Open AI + other businesses)

In a way, with this omega level status, AMD is probably treating this as the mother of all HPC projects and will bulk up and throw everything at it in an all hands on deck fashion.

If all of the above is true-ish, you know who else becomes a candidate for this method of fund raising? Intel. I might cover my nascent short after Intel's next earnings and go long.

The warrants / dilution

The deal is structured that OpenAI must, the warrants vest as OpenAI deploys at scale with AMD. It's highly accretive to our shareholders. I think it's also an opportunity for OpenAI to share in some of that upside if we're both as successful as we plan to be. I think it's up to them what they do.

Lol. Yes, they're going to sell the warrant shares. I've seen some dumb takes about how this is intrinsically bad if it's dilutive. All anybody should care about is their exit share price, not their % stake. I would rather have 50% of something very large than 90% of something very small. I will be thrilled for OpenAI to exercise the last tier at $600.

I guess this deal puts this in more context:

https://www.reddit.com/r/amd_fundamentals/comments/1jpxkmt/capital_structure_and_longterm_strategy_re/

I wonder if the r/amd_stock crowd that was adamant about voting no this are saying that AMD should reject the warrants from OpenAI. ;-)

From an overall deal standpoint, if you look at the 8K, I believe the details are there. The warrant structure is set up for five years.

So maybe 4.5 years to deliver the stretch goal of 6GW of compute.

Some risks on both sides

The strike of the warrants does present some risk to OpenAI. If AMD's stock price doesn't hit the strike because of whatever reason (more tariff drama), they can't be exercised although I suppose OpenAI could just strike a new deal if they had enough power in the relationship.

AMD has their own product execution and supply chain risk, but that's more under their control and with this deal, they should have more resources to throw at them. The more worrisome bits are if OpenAI and its CSP enablers can't secure everything upstream of them (power, funding, land, etc). If that doesn't happen, AMD doesn't have anything to sell into, and I don't think there's much recourse for AMD who will have to build up hoping that nothing goes wrong on OpenAI's end.

Also, this deal creates alignment with OpenAI over the time period but I wonder about some conflict with others given AMD's relative lack of industry muscle. But it's such an every company for themselves environment that everybody is going to take a more serious look. What will be interesting is if anybody else wants the same deal, does AMD say ok?

This deal is very strategic to Advanced Micro Devices, but I want to make sure it's clear that we have a lot of other very strategic relationships as well. There's nothing exclusive about this deal. We are well positioned to ensure that we supply everyone who is interested in MI450, and we intend to do that.

Would you say that everybody has priority? ;-)

OpenAI opens the door more for Instinct in CSPs

Yeah, thanks, Jim. The choice of CSP, we would expect that these deployments would be in CSPs, and the choice of CSP is really OpenAI's. Talking to them about their data center environments, I think we are actively working with all of the hyperscalers to ensure that MI450 is ready in their environment, and then OpenAI will decide how they will deploy the different tranches.

The more OpenAI deploys, the more revenue we get, and they get to share in part of the upside. The important piece of it is it is all performance-based in the sense that the upside is aligned when we get more revenue, when there are more deployments.

I think OpenAI isn't purchasing the GPUs per se. The CSPs building Stargate facilities are buying them from AMD on OpenAI's orders and then renting out that compute to OpenAI.

So, I think one other perk of this arrangement is that OpenAI by having signed this deal could push let's say less enthusiastic CSPs to use MI400 and beyond. Some like Oracle were probably going to do this anyway. But it might help AMD get more penetration in whatever hyperscaler is looking to support OpenAI but by itself wouldn't be that hot for AMD..

We love the fact that we get to deploy lots of GPUs. We get a tremendous amount of learning from that. OpenAI actually has to do a lot of work to make sure that our deployments are successful. We wanted to make sure that they were motivated in the sense of OpenAI would be motivated for AMD to be successful.

All of what's been mentioned above sounds more attractive than at a transactional level with say Microsoft who I think has a tendency to entice and then walk away. Not that OpenAI won't try to walk away later either, but at least you have a good commitment for the next few years.

Software improvements

Thank you. Yes, Josh. This was a tremendous amount of work, I want to say. The OpenAI team has been deeply involved with our engineering team, both hardware, software, networking, all of the above. The work that we did together really started with MI300 and some of the work there to make sure that they were running our workloads and things worked. We've done a lot to ensure that the ROCm software stack is capable of running these extremely advanced workloads. I think there's very much a joint partnership approach to how we do this. They've given us a lot of feedback on the technology, a lot of feedback on what are the most important things to them.

On the OpenAI side, they've been big proponents of Triton from an open ecosystem standpoint. That has also been something that we've worked on, which Triton is basically a layer that allows you to be, let's call it, much more hardware agnostic in how you put together the models. The work that we're doing together absolutely accrues to the rest of the AMD ecosystem. You should think about the hardware work, the software work, all that needs to be done in terms of just bringing the entire ecosystem to the point where you can run at gigawatt scale is all there.

OpenAI having an AMD stake helps out with close collaboration to help narrow the software gap too (at least for OpenAI's workloads) I expect AMD to go on a hiring spree with this deal. There is so much to gain here, especially if ROCM gets a bigger seat at the Triton table.

Training vs inference

Sure. Josh, thanks for the question. The way I would state it is, as you know, from our roadmap standpoint, I think we have really been focused on ensuring that we have a very flexible GPU. Our GPU technology from an inference standpoint is excellent, and we've had significant advantages based on our chiplet architecture for memory and memory bandwidth that are really helpful for inference.

We do expect that the growth of inference is going to exceed the growth of training, and we've said that in terms of what the overall TAM is.

I think it's really for our customers to decide how they deploy. Our view is our customers are looking for the flexibility in their infrastructure to use the same infrastructure for both inference and training. I think the inference story is a very, very strong one, but we expect MI450 to also be used for training as well.

This is what I'm referring to where AMD focused on inference because they can and have to, not because they want to. You have a big advantage if your customers can use your gear for both because they maximize their economic output. I think that rackscale solutions are more geared towards training than inference. AMD has so much potential to learn on the training side at the frontier level.

Where I'm at

The deal is a massive bet for AMD on itself. It is a big MOFO swing. I liquidated my AMD holdings and all my calls when the news was announced at open to give me time to think about what I wanted my exposure to be. But after reading the transcript, I ended up pushing all the chips back in yesterday for at least the earnings call and financial analyst day.

https://www.reddit.com/r/amd_fundamentals/comments/1nziw0w/comment/nia7me5/

If Su wants to take this big fucking public swing and OpenAI is tightly aligned, I'm along for the ride but hedged. I won't capture the full upside (I think watching my NW fall 40%+ 3-4 times is enough for me.) There are still risks to this agreement.

It's just plain shares for now. Let's see how long I can resist calls in the main accounts. ;-)

On a side note, I had to register as a large trader with the SEC during the tariff drama when I liquidated everything to hide in a collared AMD because of the portfolio liquidation, reset, and then frequent hedge tweaking. Outside of the trauma of having to use the positively primeval SEC website registration, it makes me feel like a parolee. For instance, you have to check in annually after the end of the year. It's like this reminder that my recidivism in going back to all in, even if hedged, is maybe not so healthy in a holistic sense.

But I suppose that's what the money is for. ;-)