Key Morningstar Metrics for Advanced Micro Devices
- Fair Value Estimate: USD 300.00
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
Advanced Micro Devices AMD and Meta Platforms META announced an expanded strategic partnership wherein Meta may deploy up to 6 gigawatts of AMD’s customized GPU solutions, with the first gigawatt expected to begin in the second half of 2026. Meta has the option to acquire 160 million AMD shares via warrants.
Why it matters: The deal resembles AMD’s flagship deal with OpenAI, both in gigawatt size and warrant issuance/timing. AMD has long hinted that it has other customers beyond OpenAI, and we view this deal as largely in line with our expectations for its expansion.
The bottom line: We raise our fair value estimate for narrow-moat AMD to USD 300 per share from USD 270 as we boost our AI graphics processing unit revenue assumptions, partially offset by the potential dilution from the warrants. The shares rose nearly 9% on Feb. 24 but still appear undervalued (all returns in this article are measured on a US dollar basis).
- We suspect our disconnect with market prices stems from pessimism about OpenAI’s expansion. AMD’s deal with Meta helps to derisk AMD from being highly exposed to OpenAI specifically or a single model builder generally.
- That said, our revenue estimates do not fully incorporate 6 GW from both OpenAI and Meta by 2030, so we can envision further upside if both model builders deploy AI as aggressively and quickly as expressed in their press releases.
Coming up: AMD doesn’t expect much revenue from the Meta deal in 2026, as sales should start in the fourth quarter. Revenue should accelerate from there. The deal brings Meta closer to reaching its previous guidance for AI growth at an 80% compound annual rate over the next three to five years.
- The customized product for Meta appears to be at the chip and system level, but it doesn’t appear to be revolutionary. AMD thinks AI revenue will be at similar gross margin levels to the rest of its AI business, while additional operating costs to serve Meta are minimal.
