Jim Cramer Questions Lisa Su on Meta’s Equity Stake in AMD
During a recent CNBC interview, Jim Cramer raised questions about the equity arrangement between Advanced Micro Devices, Inc. (AMD) and Meta Platforms, Inc. Cramer specifically challenged CEO Lisa Su regarding AMD’s decision to include performance-based equity warrants in their agreement, which gives Meta potentially up to 160 million shares, approximately 10% of AMD.
Questions on AMD’s Equity Stake Deal with Meta
Cramer contrasted AMD’s strategy with that of Nvidia Corp, which recently entered into a partnership with Meta without offering any equity. He questioned the necessity of awarding shares to secure the partnership, asking, “Why is Meta taking a share in you?” This inquiry highlights concerns about AMD’s perceived need to sacrifice equity for business opportunities.
Details of the AMD-Meta Partnership
The AMD-Meta agreement spans multiple years, focusing on the deployment of up to 6 gigawatts of AI compute capacity, driven by AMD’s Instinct GPUs. The performance-based warrants issued will vest incrementally as specific shipment milestones are met, with final vesting contingent upon achieving performance targets.
Lisa Su’s Defense of the Agreement
Lisa Su defended the partnership’s structure, asserting that it represents a mutual benefit for both AMD and Meta. She characterized it as transformative for shareholders, linking it to the anticipated growth of the AI accelerator market, which she predicts could reach $1 trillion over the next five years.
- Performance-based equity warrants could translate into significant revenue.
- Every gigawatt of AI compute capacity corresponds to substantial revenue potential.
Su emphasized that optimizing hardware and software together on a large scale is crucial for growth in this fast-evolving sector.
Additional Partnerships and Future Projections
In another strategic move, AMD entered a similar agreement with OpenAI, anticipated to yield up to $135 billion in revenue over several years. This deal also includes performance-based warrants, allowing OpenAI the opportunity to obtain up to 160 million AMD shares based on specific deployment conditions related to AI workloads.
Market Reactions
Following the news, AMD’s stock rose by 8.77% during Tuesday’s regular trading hours, with a slight gain of 0.26% in after-hours trading. In contrast, Meta’s shares increased by 0.32% during regular hours but faced a small decline of 0.17% post-market.
According to market analysis, while AMD shows a strong long-term price trend, its short- and medium-term performance appears weaker, paired with a low value ranking.
