Advanced Micro Devices has put a price on its fastest-growing business, and the bill arrived inside an otherwise record quarter. The chipmaker recorded a $1.07 billion non-cash charge in its third quarter, ended September 26, to remeasure warrants granted to OpenAI and Meta Platforms, cutting reported earnings to $1.46 a share while underlying earnings reached $2.09. Revenue still hit a record $13.4 billion, data-center sales nearly doubled, and shares rose in extended trading, leaving investors to judge whether the charge is the cost of winning the largest AI orders or an early warning about how those orders were won.
What the charge actually is
The charge is accounting, not cash leaving the company, and that distinction matters for how the quarter should be read. AMD’s own reconciliation lists a $1,097 million change in the fair value of its warrant liability, worth 66 cents a share, driven by changes in its share price and other valuation assumptions.
The warrants rise in value on paper as AMD’s stock rises, so a stronger share price can produce a larger charge even when the chip business is improving. That quirk separates the reported result from the cash generated in the period, and it explains why the headline earnings figure looks weaker than the operating story underneath it.
The two deals behind it
AMD agreed in February to sell up to $60 billion worth of AI chips to Meta over five years, giving Meta warrants that could let it buy as much as 10 percent of the chipmaker if certain milestones are met.
That deal followed a similar agreement with OpenAI last year, giving the startup the option to buy roughly 10 percent of AMD, with vesting tied to purchase volumes and share-price thresholds, and it extended the supplier-stake pattern seen in October.
As shipments under those agreements begin to ramp up, the warrants are being remeasured, and AMD finance chief Jean Hu said on the earnings call that dilution would begin once OpenAI and Meta satisfy vesting and exercise conditions. Those conditions include shipment and other commercial requirements, with more guidance expected in 2027 on when they could be met.
The warrants’ ultimate value depends on AMD’s share price when they are exercised, and the two customers could own a large stake for as little as a penny a share if the warrants fully vest. That is the trade AMD accepted: guaranteed demand from the largest AI buyers, paid for in part with a claim on its own equity.
A pattern across the chip industry
AMD is not alone in using equity to lock in orders, and the pattern is becoming a feature of the AI buildout rather than a one-off. Chip startup Cerebras granted OpenAI warrants against a $20 billion commitment, while Marvell has issued warrants giving Google the right to buy a potential $12.2 billion stake.
Qualcomm gave Amazon warrants in a $60 billion deal for its AI data-center chips, showing how suppliers across the industry are trading ownership for scale. The deals highlight the circular nature of the current boom, in which companies can simultaneously be customers, suppliers and investors in one another.
What the quarter itself showed
Strip out the warrant remeasurement and the quarter was strong on AMD’s own numbers. Revenue rose 45 percent year over year to $13.4 billion, data-center revenue reached a record $8.5 billion, up 97 percent, and non-GAAP net income was $3.5 billion, or $2.09 a share.
AMD also forecast fourth-quarter revenue of about $17 billion, plus or minus 3 percent, with non-GAAP gross margin of about 55 percent. That outlook, driven by demand for its Instinct accelerators and EPYC processors, is why shares rose about 8 percent in extended trading despite the headline charge.
Why It Matters
The charge matters because it exposes the real price of challenging Nvidia, not just in engineering but in deal structure. Analysts quoted in the reporting called the warrants a major vote of confidence in AMD’s chips and software, while also noting they are unlikely to dent Nvidia’s dominance while the market leader sells every AI chip it can make.
For shareholders, the question is dilution against growth: if OpenAI and Meta hit their milestones, AMD gains enormous, contracted demand but gives up a slice of itself to secure it. If they do not, the warrants lose value and the charge reverses in part, but the demand that justified the deals may also have faded.
Our read
The market’s first reaction suggests investors treated the charge as a cost of entry, not a crack in the business. A record quarter, a near-doubling in data-center sales and a stronger-than-expected 2027 outlook are hard to dismiss, and the warrant charge is explicitly non-cash and tied to a rising share price.
Still, the structure deserves scrutiny that a single earnings beat does not answer. Equity-linked orders blur the line between a customer and an owner, and they reward AMD most when its stock is already rising. The test will come in 2027, when AMD must show that Helios systems and repeat orders, not just warrants, keep the largest customers buying.
That test also applies to the wider industry, where similar warrants now link Cerebras, Marvell and Qualcomm to their biggest buyers. If the AI buildout slows, those links could turn from a sign of confidence into a source of shared exposure, and AMD’s $1.07 billion charge will look like an early, legible warning of that entanglement.
Background
AMD, based in Santa Clara, California, has spent years building an alternative to Nvidia’s AI hardware, pairing EPYC processors with Instinct accelerators and an open software stack. Its third quarter ended September 26, and the warrant charge was the part of that result its earlier earnings coverage had not examined.
Source: Reuters report and AMD earnings release
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