Is AMD Turning Into Nvidia’s Kryptonite? Here’s How High It Can Go

AMD (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) have been locked in a high-stakes AI chip race that has sent investors into a frenzy, especially around AMD.

Recently, AMD announced a major AI infrastructure partnership with OpenAI. As part of the deal, OpenAI can acquire up to 10% of AMD. Wall Street sees this as a validation of AMD’s hardware accelerators.

Analysts think that AMD accelerators can be at a “good enough” stage where companies are feeling comfortable using them at a very large scale.

The OpenAI deal is expected to generate tens of billions in revenue over several years, as AMD will supply 6 GW of AI compute hardware. For context, that’s around 0.5% of total U.S. power capacity.

For the past three years, there hasn’t been any serious head-to-head competition against Nvidia. Broadcom (NASDAQ:AVGO) is one name that springs to mind, but again, its custom chips don’t offer direct competition. Still, the fact that it was stealing some market share caused AVGO stock to surge in earlier months.

Could a similar surge transpire for AMD? Let’s first look at what the deal is and what Nvidia is doing to counter AMD.

The OpenAI-AMD Deal

OpenAI is buying 6 GW of AMD Instinct-GPU compute capacity over five years. First 1 GW must be installed and accepted in H2-2026 using the MI450-series GPUs.

AMD issued one warrant to OpenAI for up to 160 million shares of AMD common stock, or about 10% of current shares. These warrants expire around 5 years from now.

This deal has a lifetime revenue worth “tens of billions.” And while it is dilutive, the one-day market cap gain AMD saw right after the announcement of the deal offset the cost of dilution for shareholders and then some.

The aggressive push by Nvidia to sink AMD

Before the OpenAI deal with AMD, Nvidia made a deal with Intel (NASDAQ:INTC) to build custom x86 CPUs for Nvidia’s AI platforms, directly challenging AMD’s EPYC dominance. That deal included building x86 SOCs with Nvidia RTX GPU chiplets, a direct shot at AMD’s APU strategy. And by tying CUDA to x86, Nvidia is also walling off AMD from the AI software-hardware stack.

This momentarily tanked AMD stock by ~9%, but the stock picked back up.

Shortly after the OpenAI-AMD deal, Jensen Huang went on CNBC and said, “It’s imaginative, it’s unique and surprising, considering they were so excited about their next-generation product,” adding, “I’m surprised that they would give away 10% of the company before they even built it. And so anyhow, it’s clever, I guess.”

MI450 chips haven’t even been manufactured or deployed, so it makes sense why Huang seems skeptical of the 10% equity offer from AMD.

That said, he is downplaying the competitive threat from AMD. And significantly, Huang did not address why OpenAI felt compelled to diversify its chip suppliers or the broader market implications.

How AMD can become Nvidia’s kryptonite

AMD’s bet with the 10% equity offer seems to have paid off, since the market has already rewarded it heavily. Plus, AMD gains a marquee reference customer to sell to hyperscalers and neo-clouds.

Nvidia is facing a real threat for the first time, as this deal could seriously bring down margins in the long run. Nvidia may no longer have a chokehold on AI training hardware, and this will finally give AI training companies leverage over Nvidia. As a result, Nvidia may start losing pricing power, but to what extent is anyone’s guess.

Should you buy AMD stock or NVDA stock now?

Piper Sandler forecasts “well over $100 billion through October 2030” in revenue. AMD has posted $29.6 billion in revenue over the past year, so this could potentially lead to AMD posting explosive sales growth over the coming years as this deal materializes. If AMD’s operating cash flow estimates hold and Wall Street keeps the premium, AMD stock could touch $600 by the end of 2027.

This may seem far-fetched today, but AMD’s market cap of $378 billion is a fraction of what it could be if it starts to truly challenge Nvidia.

However, the nature of the deal means AMD will not have nearly as much pricing power as Nvidia does. The company will have to deal with margin volatility, even if revenue rises. Some other hyperscalers could join in and procure GPUs from AMD, but the company needs to prove its products first.

Thus, I’d keep a plurality of an AI portfolio in NVDA stock. It gives you strong growth and AI exposure with defensive cash flows. Keeping a smaller stake in AMD stock is also worth it, but AMD is not eating Nvidia’s lunch anytime soon.