AMD’s deal with OpenAI gives Nvidia much-needed challenger in market it dominates

Nvidia’s grip on the AI chip market just got its first real threat. After ruling over more than 90% of the GPU market used for AI, the company now faces a serious challenger; AMD.

On Monday, AMD announced it’s selling billions of dollars’ worth of GPUs to OpenAI, a move that throws it into direct competition with Nvidia in the most valuable tech race happening today.

This new deal comes nearly 30 years after Intel relied on AMD to dodge monopoly accusations.Now Nvidia finds itself in a similar spot.AMD, once again, is stepping in as the alternative.

Bloomberg Intelligence analyst Mandeep Singh said it straight: “Right now, Nvidia almost has a monopoly, with AMD having a low-single-digit share in the $250 billion market” for AI data center chips.

AMD gets boost after OpenAI move

Until now, OpenAI and Nvidia have basically shaped the whole AI era. Nvidia’s GPU dominance drove its market cap to $4.5 trillion. Meanwhile, OpenAI, thanks to ChatGPT and huge data center plans, has hit a $500 billion private valuation. The two are deeply tied; Nvidia is a major investor in OpenAI and recently pledged up to $100 billion toward building OpenAI’s infrastructure.

But AMD’s stock exploded 24% on Monday, its biggest single-day gain in 22 years. It jumped 4% Tuesday, then another 11% Wednesday, pushing its market cap to $380 billion. That’s a 43% jump in one week, putting it on pace for its best run since 2016. And this time, the surge isn’t built on hype. It’s backed by a contract that’s expected to deliver “double digit billions” in revenue to AMD, starting in the second half of next year.

If AMD stock hits certain price targets, OpenAI could own up to 10% of the company. CEO Lisa Su called the deal a “win-win” and said OpenAI’s commitment shows AMD’s chips are finally fast enough, and priced right, to compete. She added that it’s a “clear signal” AMD’s software and hardware are ready for “the most demanding at-scale deployments.”

Nvidia faces political heat as AMD steps up

Nvidia’s dominance hasn’t gone unnoticed. Last year, around the end of the Biden administration, the Justice Department reportedly subpoenaed Nvidia, though the company denied it.

Senator Elizabeth Warren backed the probe, claiming Nvidia’s rise was “supercharged by anticompetitive tactics that have choked off competition and chilled innovation.” Nvidia’s response? It said it wins on merit.

The OpenAI-AMD deal also helps OpenAI distance itself from any one supplier. CEO Sam Altman posted that AMD chips will be “incremental” to its Nvidia orders, and stressed that more compute is needed across the board.

On CNBC, Nvidia CEO Jensen Huang said the deal was “unique and surprising,” adding, “I’m surprised that they would give away 10% of the company before they even built it.”

Alden Abbott, a former FTC general counsel, said there’s no sign of monopolization or cartel behavior here. “None of these things are, as far as I’m aware, exclusive contracts tying up avenues to other competitors,” he said.

AMD, for its part, has always tried to downplay a direct fight with Nvidia. But the company now estimates that the AI chip market could be worth $500 billion by 2028. This OpenAI deal is already expected to bring in tens of billions of dollars, and it might just rewrite the rules of the game.

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