Three-day surge of 43%! AMD and OpenAI's milestone agreement boosts stock price, analysts collectively raise targets

The milestone agreement reached with OpenAI has boosted AMD's stock price.

AMD closed up 11.4% this Wednesday, marking the first time in history that its stock closed above $230, with a cumulative increase of 43% over the last three days, the largest three-day gain since April 2016.

This surge is primarily due to OpenAI's announcement on Monday that it will collaborate with AMD to deploy a total computing power of 6 gigawatts (GW) of AMD chips. On that day, AMD's stock price rose nearly 38% at one point, closing up nearly 24%, marking its best single-day performance in a year.

Analysts generally believe that this agreement will reshape the AI chip competitive landscape. Mizuho analyst Jordan Klein stated that AMD's actual financial data is no longer important; the key is whether the company can quickly ramp up production of the MI450 chips to achieve the full deployment of 6GW of chips for OpenAI. Gimme Credit senior bond analyst Dave Novosel believes that OpenAI's endorsement of AMD chips may prompt other AI leaders to seriously consider adopting AMD's GPUs.

This week, 26 Wall Street analysts have raised their target prices for AMD, with the highest target price suggesting that after this week's three-day surge, AMD's stock could rise nearly 30% again. The vast majority of analysts maintain a buy rating.

On Wednesday, AMD became the best-performing stock in the S&P 500 index, revitalizing the overall AI concept stocks. Even Oracle, which had dropped over 7% on Tuesday due to disappointing cloud profit margins, successfully reversed its decline, closing up 1.5%.

OpenAI Agreement Opens New "Equity for Procurement" Model

According to the agreement, OpenAI will deploy a total of 6GW of AMD GPU computing power over the next few years, with the first batch of 1GW chips set to begin deployment in the second half of 2026. At the core of the agreement, AMD grants OpenAI warrants to purchase up to 160 million shares of common stock, with an exercise price of only a symbolic $0.01.

Analysts believe that the brilliance of this agreement lies in its financial structure.

AMD's filings with regulators show that the exercise of some warrants is linked to AMD's stock price reaching specific targets, functionally equivalent to a performance-based equity incentive rather than traditional equity dilution, allowing AMD to retain governance control and board representation.

The first batch of warrants will become effective when the first 1GW of computing power deployment is completed, and the subsequent unlocking of warrants is tied to two dynamic variables—OpenAI's future GPU procurement volume and AMD's stock price.

This design creates a powerful symbiotic relationship. OpenAI can only realize the full equity benefits if it actually procures and deploys AMD's hardware, effectively drives growth in AMD's data center business, and gains recognition from the capital markets, reflected in a rising stock price For OpenAI, acquiring AMD stock at almost zero cost means that the returns are entirely dependent on operational execution and market performance.

AMD's Chief Financial Officer Jean Hu stated that the agreement "is expected to bring AMD hundreds of billions of dollars in revenue" and "enhance the company's earnings per share."

If the warrants are fully exercised, OpenAI could potentially hold about 10% of AMD's shares, with the agreement valid until October 2030. AMD also retains anti-dilution and transfer restriction clauses to ensure that OpenAI cannot freely sell or transfer the warrants.

Analysts Optimistic About AMD's Long-Term Prospects

Mizuho analyst Klein believes that while long-term investors are "skeptical" about AMD's recent surge and reluctant to chase the rally, there are still more catalysts ahead, including an important AMD Investor Day event in November, which is expected to bring positive factors. He emphasized that the key now is how quickly AMD can ramp up production of the MI450 chip, rather than the current performance of the MI355 product line.

Senior analyst Stephen Guilfoyle stated that the agreement with OpenAI is "AMD's biggest victory in its pursuit of market share." He pointed out that AMD had previously been a "distant second" in AI chip design compared to Nvidia, but "since Monday morning, it hasn't been that far off."

Guilfoyle also praised AMD CEO Lisa Su for shifting the strategic focus toward inference chips.

Dave Novosel analyzed that OpenAI's pursuit of diversification in chip suppliers is the primary reason for the agreement, with another reason being that Nvidia may not be able to meet all of OpenAI's chip demands. This endorsement effect from OpenAI could prompt other AI companies to seriously consider adopting AMD's chips.

Wall Street Unified in Bullish Outlook, Raising Target Prices Significantly

This week, 26 analysts have updated their coverage ratings or target prices for AMD, with 24 giving buy ratings and only 4 maintaining hold ratings.

Among them, Barclays analyst Thomas O'Malley, Melius Research analyst Ben Reitzes, and Jefferies analyst Blayne Curtis provided the highest target price of $300, with the first two raising their previous target price of $200 by 50%, and Curtis significantly increasing his target price from $170 by over 76%, making him the analyst with the largest upward adjustment.

A target price of $300 implies that AMD's stock price will rise by over 27% from the closing price on Wednesday.

Two analysts also upgraded AMD from hold to buy ratings, including Jefferies' Curtis. The other analyst is Amanda Tan from DBS, who raised her target price from $155 to $260.

Even analysts maintaining hold ratings have raised their target prices. Among them, Morgan Stanley's Joseph Moore increased his target price from $168 by 46.4% to $246, while Goldman Sachs' James Schneider raised his target price by 40% to $210