AMD’s surging share price has delivered an expensive accounting twist. OpenAI and Meta could acquire a combined 320 million AMD shares for one penny apiece, paying $3.2 million for stock worth about $155 billion.
AMD has now recorded its first major bill tied to that arrangement. The chipmaker disclosed a $1.1 billion charge connected to the warrants granted under the agreements, equal to $0.66 per share in its results.
Warrants are contracts allowing holders to purchase company stock at a predetermined price. AMD reported no charge on that line during the previous quarter, making the latest figure a sharp and highly visible change.
The charge appeared alongside strong operating results. AMD beat Wall Street estimates on Tuesday as data center sales reached a record of about $8.5 billion, nearly twice the level recorded a year earlier.
The company also forecast about $17 billion in fourth quarter revenue. AMD shares rose as much as 9% in after hours trading after closing at $484, although the stock later turned lower during premarket trading.
The unusual warrants are tied to massive chip commitments from OpenAI and Meta. Each company agreed to purchase AMD chips for data centers drawing as much as 6 gigawatts, a scale the article compared with five DeLoreans’ worth of power from the 1985 movie “Back to the Future.”
In exchange, OpenAI and Meta can each buy as many as 160 million AMD shares at one penny per share. Those shares become available as chips are shipped, while the final allocation requires AMD stock to reach $600, according to company filings.
If the warrants are fully unlocked, OpenAI and Meta would own about 16% of the enlarged company, according to Yahoo Finance calculations. The Motley Fool also calculated the potential share count in October.
AMD began recognizing the warrants as it shipped its new MI450 chips, Chief Financial Officer Jean Hu said during Tuesday’s call. The timing placed the accounting effect of the agreements directly into the latest quarterly results.
Hu said the charge mainly reflected “the increase in our share price and the changes in the estimated probability of meeting the warrant conditions.” AMD stock gained about 21% during the quarter and closed at $630 on Sept. 25, above the warrants’ $600 threshold.
The expense may continue climbing as the agreements advance. Hu said she expects the charge “to increase as we and our customers progress under this agreement,” with the ultimate amounts moving alongside AMD’s stock price.
That means additional chip shipments and further appreciation in AMD shares can raise the accounting tab. Still, the charge does not represent an immediate cash outflow from the company.
The charges “will not affect our non-GAAP results or free cash flow,” Hu said. For shareholders, however, the warrants still represent the prospect of substantial ownership for OpenAI and Meta if the required purchasing and stock price conditions are met.
AMD is also preparing for what it expects will be its largest quarter ever. Inventory increased by about $3 billion to a record $11.5 billion, four times the largest quarterly increase since at least 2009, according to Yahoo Finance calculations using company filings.
That inventory expansion came with pressure elsewhere in the financial statements. Free cash flow declined to about $550 million, far below the nearly $2 billion analysts expected, according to Bloomberg.
AMD’s debt also more than doubled to about $7 billion after an August bond sale. The combination of rising inventory, weaker free cash flow and higher debt shows the financial weight accompanying the company’s push to meet expected demand.
The warrants offer one consolation for existing shareholders because the shares unlock only if OpenAI and Meta continue buying chips and AMD stock continues rising. AMD says those purchases are only beginning.
Chief Executive Officer Lisa Su offered an aggressive growth outlook during the call. “Based on our current visibility, we now expect revenue to grow more than 80% in 2027,” she said.