AMD said on Tuesday it had agreed to sell up to $60 billion worth of artificial intelligence chips to Meta over five years in a deal that would allow the Facebook owner to buy up to 10% of the chip company. AMD shares rose more than 10% in premarket trading after closing at $196.60 the previous session.

The company signed a similar agreement with OpenAI last year, which was hailed as a vote of confidence in its chips and software, giving a significant boost to its stock price.

A series of recent chip supply deals highlight the AI ​​industry’s huge demand for processors. Meta has separately struck a deal with AMD's larger rival Nvidia to buy millions of artificial intelligence chips.

The partnership highlights the deepening ties between some of the AI ​​industry's top players, amid growing concerns about circular transactions. Meta and OpenAI will take a stake in one of its most important suppliers, at a time when rival chipmaker Nvidia is eyeing investments from some of its biggest customers, including ChatGPT's parent company.

AMD will supply six gigawatts of chips to Meta, starting with one gigawatt of the company's upcoming MI450 flagship hardware in the second half of this year, CEO Lisa Su said at a press conference.

Investor concerns about the AI ​​market also extend to the long-term returns from Big Tech's relentless spending to expand data center infrastructure.

According to calculations, the total capital expenditures of Alphabet, Microsoft, Amazon and Meta this year are expected to reach at least 630 billion US dollars, most of which will be concentrated on data centers and artificial intelligence chips.

In addition to AMD's flagship graphics chips, Meta plans to purchase central processing units, including variants customized for the social media platform's needs.

Su said the custom CPU will be tuned to provide powerful performance while reducing energy consumption as much as possible. The deal will include both generations of AMD CPUs.

"There's no question that Mark is ambitious in achieving his goals, and we want to leverage all aspects of our technology to really help Meta achieve that goal," Su said, referring to Meta CEO Mark Zuckerberg.

Meta helped optimize the MI450's design for a computational process called inference, the process by which chatbots like OpenAI's ChatGPT respond to user queries.

Industry analysts expect the size of the inference hardware market to dwarf the market for equipment needed to build artificial intelligence to run large models.

As part of the agreement, AMD will issue 160 million share warrants with an exercise price of 1 cent.

The warrants will vest during the course of the transaction and will vest upon AMD's stock price reaching an upside performance target of up to $600. In addition to the share price target, Meta will also need to meet "technical and commercial considerations" for each tranche of warrants.

"Meta made a big bet on AMD," Su said.

Meta infrastructure director Santosh Janardhan said in a call with reporters that Meta plans to continue buying chips from other manufacturers while developing its own processors.

Meta has been in talks with Google about using the company's tensor processors for artificial intelligence work, people familiar with the matter said. The scale of data centers and infrastructure Meta is building requires multiple chip suppliers and approaches, Janardhan said.

"All chipmakers will eventually have a place," Janardhan said.