Meta Platforms, the giant ruled by Mark Zuckerberg, has struck a $60 billion deal with AMD. At first glance, this is a classic chip supply contract to secure the infrastructure for ambitious AI projects. However, a deeper analysis of the structure of this deal reveals a mechanism that is increasingly worrying investors: a return to so-called closed-loop deals.
Capital for silicon
The key element of the deal is not the amount itself, but Meta’s right to take up to 10% of AMD shares. The warrant-based mechanism, which becomes due when AMD shares reach certain targets (as low as US$600), makes Meta cease to be a mere customer and become a strategic co-owner.
For AMD CEO Lisa Su, this is a powerful vote of confidence. Acquiring such a big player helps to challenge Nvidia’s dominance, especially in the upcoming MI450 chip cycle. The market reacted enthusiastically, lifting AMD’s share price by 6%, while Nvidia saw a slight decline. However, critics such as analysts at Hargreaves Lansdown rightly point out that having to give away a tenth of the company suggests that AMD still needs to ‘buy’ its market share, rather than relying solely on organic demand.
Diversification as an insurance policy
The Met’s strategy is clear: independence from a single supplier. While the company still buys millions of processors from Nvidia and develops its own chips, the alliance with AMD gives it direct influence over hardware architecture. New chips are to be optimised for inference – a stage that experts believe will soon eclipse the market for just training models in terms of revenue generation.
This partnership is part of a wider trend in which Big Tech – with almost unlimited capital at its disposal – is taking control of the supply chain. Similar moves by Alphabet against Anthropic or AMD’s earlier pacts with OpenAI create a web of mutual capital ties.
