Meta's $100 billion deal buys it freedom from Nvidia dependence

Meta and chipmaker Advanced Micro Devices, or AMD, have announced a deal worth $100 billion.

The social media company pledged to buy millions of AI chips from the Nvidia competitor. In exchange, Meta could potentially get a 10% stake in AMD if share prices rise to a certain value — and the stock price did get a boost after the deal was announced Tuesday. The deal is nearly identical to one that OpenAI made with AMD last year that also boosted the stock price.

But calling AMD a competitor to Nvidia might be a bit of a stretch, said Chris Miller, a professor of international history at Tufts University. The company commands less than 10% of the AI chip market.

“And that’s meant that the ecosystem around Nvidia, not just the chips themselves, but also the software that surrounds them, is much, much more developed than at AMD,” Miller said.

Miller said it makes sense for AMD to give up part of the company to attract a big-money customer like Meta.

And Meta gets more than equity in AMD, said Gil Luria, head of technology research at D.A. Davidson — it also gets a diversified supply chain for the hardware that is the chokepoint in the AI boom.

“They have been beholden to Nvidia, especially over the last three years, and that means that Nvidia has all the pricing power,” Luria said.

Offering equity to customers is just the latest in what’s becoming a tangled web of deals in AI.

But what can look like a virtuous cycle of investment can also tip into something more troubling — circular financing, where the same dollars flow between companies, said Jay Goldberg, senior analyst at Seaport Research Partners.

“It's not circular, but it's kind of like a dodecahedron,” Goldberg said. “It’s a shape that is starting to kind of resemble a circle. If it goes on much longer, it will become a circle, but we’re not quite a circle yet.”

It becomes a circle when companies start buying demand for their own products.