Meta Platforms, the parent company of Facebook, is making aggressive moves to bolster its artificial intelligence capabilities, signing a significant deal to acquire AI chips from Advanced Micro Devices (AMD). This agreement not only involves the purchase of AMD's latest MI450 chips to power Meta's data centers but also provides Meta with the opportunity to acquire up to a 10% stake in the chip manufacturer through a performance-based warrant. The warrant is structured to vest as specific milestones are achieved, with the first tranche vesting upon the initial 1-gigawatt shipment and additional tranches as Meta's purchases scale to the full 6-gigawatt agreement, a deal potentially valued at over $100 billion.

This strategic partnership with AMD comes closely on the heels of Meta's announcement of a long-term collaboration with Nvidia, where it will utilize millions of chips and other essential equipment for its extensive artificial intelligence data centers. The simultaneous deals underscore Meta's multifaceted approach to securing the immense computing power required for its ambitious AI initiatives, as the company faces stiff competition from rivals such as Google and OpenAI, the creator of ChatGPT.

The AI market is experiencing an unprecedented boom, often likened to the most significant technological shift since the launch of the iPhone. Nvidia has historically held a substantial lead in this sector, having successfully tailored its Graphics Processing Units (GPUs) from their origins in video gaming to become the backbone for training powerful AI systems, including large language models and image generators. AMD is actively striving to narrow this gap, intensifying its efforts to compete with Nvidia in the burgeoning AI chip segment.

While the demand for AI chips continues to soar, there are growing discussions regarding the substantial investments being made by tech giants like Meta. Questions are being raised about the potential for these companies to recoup their enormous expenditures through enhanced profitability and productivity in the future. Nevertheless, Meta has demonstrated a clear commitment to reviving and expanding its commercial AI endeavors. In June, the company made a $14.3 billion investment in AI data company Scale and recruited its CEO, Alexandr Wang, to spearhead a team focused on developing 'superintelligence.' Furthermore, in December, Meta acquired the artificial intelligence startup Manus, illustrating its aggressive strategy to integrate advanced AI offerings across all its platforms, including Instagram.

The news of the AMD deal had an immediate positive impact on the market, with shares of Advanced Micro Devices jumping more than 9% before market open on Tuesday, reflecting investor confidence in the company's growing role in the AI chip supply chain.