Why Advanced Micro Devices Stock Slipped on Friday
Key Points
OpenAI may delay its IPO to 2027, postponing access to cash that would be spent on AI chips.
AMD already has a multi-multi-billion contract to sell AI chips to OpenAI -- IPO or no IPO.
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Advanced Micron Devices (NASDAQ: AMD) stock fell 2.9% through 10:55 a.m. ET Friday as worries mounted over the health of the artificial intelligence economy.
Worries that began this morning at OpenAI.
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OpenAI's words to the wise
As The New York Times reports, OpenAI and its advisors are nervous after watching SpaceX (NASDAQ: SPCX) stock IPO to near-universal acclaim, rise rapidly for a few days -- and then abruptly U-turn south, losing $600 billion in market capitalization in a matter of days.
This reversal in sentiment surrounding SpaceX -- which started as a space company but is becoming ever more an artificial intelligence company -- has OpenAI CEO Sam Altman on edge, and wondering whether now is really the best time for another AI IPO. OpenAI's advisors are telling Altman he must choose: wait for a $1 trillion valuation and IPO in 2027, or IPO in 2026 and risk a lower valuation.
Altman really wants to secure a trillion-dollar valuation, though. For this reason, he's leaning toward postponing the IPO.
What this means for AMD
It's not 100% clear what this means for AMD. On the one hand, a delayed IPO would also delay a cash windfall for OpenAI -- which it would presumably spend on AI computing capacity and AI chips from AMD (and others).
On the other hand, OpenAI already signed a deal with AMD last year to buy tens of billions of dollars-worth of AMD chips over the next five years.
Investors don't seem too nervous about the effects of a delayed IPO, and comparing the length of the supply commitment (five years) versus the potential delay in OpenAI receiving IPO cash (less than one year), I suspect the risk to AMD's sales here is minimal. Today's 3% decline is probably more than enough to cover it.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
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