The most expensive words in AMD's third-quarter earnings weren't about chips. They were about warrants.

On Tuesday, AMD disclosed a $1.07 billion non-cash charge — 66 cents a share — to account for the stock warrants it handed to OpenAI and Meta as part of the blockbuster supply deals that made AMD a serious Nvidia rival, according to Reuters. The math is simple: in February, AMD agreed to sell Meta up to $60 billion of AI chips over five years, and threw in warrants that could let the Facebook owner buy up to 10% of the chipmaker. A similar deal with OpenAI last year gave the startup the option to buy roughly 10% of AMD. Now that shipments under those agreements are ramping up, the bill — in accounting terms — has arrived.

Here's the part that should make every AMD shareholder pause: OpenAI and Meta could end up owning large stakes in AMD for as little as a penny a share if the warrants fully vest and get exercised, substantially increasing the share count. CFO Jean Hu told analysts the warrants begin diluting shareholders once OpenAI and Meta satisfy vesting conditions tied to shipments and other commercial milestones, with more guidance coming in 2027.

And yet the market cheered. AMD forecast faster-than-expected 2027 growth on surging data-center sales, sending shares up 8% in extended trading and lifting Intel, Nvidia and Broadcom with it.

That's the AI boom's defining logic, dressed up in one earnings call: the companies are customers, suppliers, and investors in each other all at once. AMD has struck a similar chip-purchase arrangement with Anthropic (there, AMD invested in the lab). Chip startup Cerebras granted OpenAI warrants against a $20 billion commitment. Marvell issued Google warrants worth a potential $12.2 billion stake. Qualcomm gave Amazon warrants in a $60 billion data-center chip deal. The circular financing web that already defines AI infrastructure — vendors funding customers funding vendors — now runs through chipmaker equity, too.

Analysts read it as a vote of confidence in AMD's AI silicon and software, though few see it denting Nvidia, which still sells every AI chip it can make. "While I do believe incentives played a role in some of their sales, I believe the bigger issue is that there is pent-up demand for a serious alternative to Nvidia and AMD's products are now starting to compete on price/performance metrics," TECHnalysis Research chief analyst Bob O'Donnell said.

He's right, and that's exactly why AMD can afford the warrants. The incentive only matters if the product is good enough to matter. AMD's data-center revenue reportedly jumped 97% this quarter — the kind of number that makes a $1.07 billion accounting charge look like a down payment rather than a cost.

Watch the dilution. The charge is non-cash and the market shrugged it off, but real share count expansion arrives later — and OpenAI's warrant even carries share-price thresholds while Meta's doesn't. By 2027, we'll know how much of AMD its two biggest customers actually own.

— via Reuters