OpenAI-AMD deal seen as major validation for AI growth thesis, Wedbush analysts say

OpenAI has partnered with AMD, committing to deploy 6 gigawatts of AMD Instinct AI GPUs starting in H2 2026, while AMD granted OpenAI warrants for up to a 10% ownership stake. Wedbush analysts interpret this as a major validation for AMD's position in the AI sector, signaling a new phase of AI infrastructure growth driven by significant capital expenditure and enterprise adoption, and placing AMD squarely at the center of AI chip investment. The announcement led to a 28.7% surge in AMD's shares, reflecting strong market confidence in the strategic alliance.

Analysis

OpenAI-AMD deal seen as major validation for AI growth thesis, Wedbush analysts say Published: 12:25 06 Oct 2025 EDT OpenAI’s newly announced partnership with Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) is a landmark moment in the AI sector, signalling a new phase in the ongoing AI revolution, according to Wedbush analysts. Under the deal, OpenAI will deploy 6 gigawatts of AMD Instinct AI GPUs, beginning with the MI450 series in the second half of 2026. In return, AMD has granted OpenAI warrants for up to 160 million shares, representing up to a 10% ownership stake in the company. Wedbush highlighted the strategic significance of the move, noting that “any lingering fears around AMD should now be thrown out the window as this gives them a major platform to monetize the AI Revolution.” The analysts see OpenAI’s stake and partnership as a vote of confidence in AMD’s technology and leadership, placing the company squarely at the center of AI chip investment. The deal is part of a broader trend of large-scale AI infrastructure investments, according to the analysts. “We believe the AI Revolution is now heading into its next stage of growth as the tidal wave of Big Tech capex spending coupled by enterprise use cases now exploding across verticals is creating a number of AI winners in the tech world,” Wedbush wrote, citing the role of cloud stalwarts such as Microsoft, Amazon, and Google in leading this unprecedented spending cycle. Wedbush also noted the global expansion of AI deployment beyond US tech giants, pointing to investments in the Middle East and the UK. “The Middle East is a perfect example as now Saudi Arabia and the UAE are diving into the deep end of the pool with Nvidia and US Hyperscalers set to build out massive AI-driven data centers,” the analysts said, highlighting how governments and enterprises are joining the AI spending wave. While the analysts acknowledged the skepticism around tech valuations, they highlighted that focusing exclusively on metrics like P/E ratios risks missing transformational growth opportunities. “If you focus solely on valuation looking out a year with P/E, you would have missed every transformational growth tech stock the last 20 years,” they wrote. Wedbush has an ‘Outperform’ rating and $190 price target on AMD. Shares of AMD added 28.7% at about $212 in the early afternoon on Monday. The newly announced partnership between OpenAI and Advanced Micro Devices (AMD) is a significant strategic validation for AMD's position within the AI hardware sector, according to analysis from Wedbush. The deal involves OpenAI deploying 6 gigawatts of AMD's Instinct AI GPUs starting in the second half of 2026, and in a crucial vote of confidence, AMD has granted OpenAI warrants for up to a 10% ownership stake. This equity component aligns the long-term interests of both companies and, as Wedbush notes, firmly places AMD as a central beneficiary of the ongoing AI capital expenditure cycle, dispelling previous market skepticism. The market's reaction was immediate and substantial, with AMD's shares surging 28.7% to approximately $212, a level that surpasses Wedbush's own $190 price target. This event is contextualized within a broader trend of massive, global AI infrastructure investment, not only from cloud hyperscalers like Microsoft, Amazon, and Google but also from sovereign entities in regions such as the Middle East, signaling a new, expansive phase of the AI revolution.

Key Decisions for Investors

• Investors should reassess AMD's long-term growth prospects, as the OpenAI partnership and equity stake significantly de-risk its AI strategy and solidify its position as a credible top-tier competitor in the accelerator market.
• Given the stock's immediate 28.7% surge to $212, which has surpassed the cited $190 analyst price target, investors should carefully evaluate valuation and potential entry points, while acknowledging the deal's transformational nature may justify premium multiples.
• The agreement validates the thesis of a broadening, multi-year AI infrastructure spending cycle, suggesting investors should monitor capital expenditure trends from hyperscalers and sovereign wealth funds as a key indicator for the entire semiconductor sector's health.
• Monitor the competitive dynamics between AMD and Nvidia, as this deal marks the emergence of a credible large-scale alternative for high-end AI GPUs, which could impact pricing power and market share across the sector over the long term.