So, we've had a little time to digest this deal, what's it all about?
Lisa Su, in her infinite wisdom, [has granted OpenAI warrants](https://www.sec.gov/ix?doc=/Archives/edgar/data/0000002488/000119312525230895/d28189d8k.htm) to purchase up to 10% of AMD stock. The purchase price? One penny per share. Can you buy AMD stock at that price? I don't think you can. So why exactly is Sam Altman, hereafter referred to as Sammy, allowed to buy at this price? Read on.
Sammy is granted tranches of warrants to purchase AMD stock for one penny, subject to vesting standards. According to what has been disclosed so far, the first tranche vests after delivery of one gigawatt of GPUs. So Sammy has to buy this first batch before it gets any stock. But don't worry, Lisa has confidence Sammy will have the money to buy them (courtesy of Jensen et al.). Vesting of the remaining tranches of warrants are "further subject to achievement of specified Company stock price targets that escalate to $600 per share for the final tranche and stock performance thresholds".
So what's going on here? This looks like a vendor financing arrangement, not unlike NVDA's recently announced gift of cash to Sammy. Except instead of funding the gift to Sammy with cash, which Lisa doesn't have, she's funding it with stock, i.e. dilution of AMD shareholders. For the uninitiated, you are paying for this. So, Sammy gets free stock, which he's free to sell at any time. He doesn't make any money and he needs enormous amounts of cash to fund his chip purchases, so what would he do with this stock? Probably sell it yeah? And what on earth would he do with the money from the stock sales? I dunno, buy the AMD chips he promised to buy maybe? Who then paid for these chips that Sammy now has in his possession? If you're an AMD shareholder, you did, and you probably didn't benefit because you got diluted for it. Okay well how much money are we talking here? Sammy has warrants for 160 million of AMD stock, the final tranche vests at $600. Why that number, what's the significance? Hmmmm... let me see..... carry the two... square root of four.... does Pi get involved here? No, I don't think Pi is needed.... oh yeah, it's about $100 billion, the same number Jensen just gave Sammy.
Why is Lisa doing this? Why is Lisa telling her shareholders they should be giving their money to Sammy? I suppose the (not very) plausible explanation is that it gives AMD street cred. If Sammy can run his workloads on AMD chips then that's great right? Other companies will surely see that AMD is competitive with NVDA and buy AMD chips without special, zero cost, financing arrangements. To the moon! Maybe. The more retail investors bid up AMD stock, the more tranches of warrants will vest and the more they themselves will fund Sammy's chips. And I'll remind you, you've already done that, yesterday and today. Sammy basically loses nothing here. You, as a shareholder, are buying his chips and you don't even get an equity stake for it.
Now, Jensen did something very similar, and he has cash so he has a bit more bargaining power. He at least gets an equity stake for that $100 billion of your money. And maybe you're fine with that, who knows. And what's that stake worth? Whatever you can dream up. Maybe zero, maybe 6 quadrillion, or anywhere in between.
So, that's the deal. All of these circular financing deals get confusing don't they? Who ends up footing the bill for Lisa and Jensen's exploits? Could it possibly be... you as a shareholder? Certainly looks that way.