Advanced Micro Devices, Inc. (NASDAQ:AMD) has finally landed the kind of AI customers investors spent years waiting for. OpenAI and Meta have committed to massive deployments of AMD Instinct GPUs, helping validate the company as the clearest large-scale alternative to Nvidia Corporation (NASDAQ:NVDA). But Morgan Stanley thinks one less-discussed part of those deals makes the profit story much uglier than the customer logos suggest.
The issue is the warrants. AMD issued OpenAI and Meta warrants covering up to 160 million shares each at an exercise price of $0.01. Together, that is 320 million potential shares, equal to nearly 20% of AMD’s roughly 1.63 billion shares outstanding. AMD’s own OpenAI filing described the warrant as a “material inducement” for entering the supply agreement.
Morgan Stanley analyst Joseph Moore focused on that cost in an August 5 note. He estimates AMD is effectively issuing more than $15 billion of warrants for every $15 billion to $20 billion of revenue tied to OpenAI and Meta. If the economic value of those warrants were treated like a cash expense, Moore argued, the profitability of that GPU business could disappear. He still called the strategy sensible because it can accelerate adoption, but said the warrants put an asterisk next to AMD’s AI progress.
That is the contradiction investors have to price. Advanced Micro Devices, Inc. (NASDAQ:AMD) reported second-quarter revenue of $11.5 billion, up 50% year over year, while Data Center revenue more than doubled to $6.7 billion. The customer wins may not tell us as much about AMD’s organic competitive position as the headlines imply if exceptional equity incentives helped secure them.
There is an important counterpoint. None of the 320 million warrant shares had vested as of June 27. Vesting requires huge GPU purchase milestones and other conditions, while the OpenAI warrant also carries AMD share-price thresholds reaching as high as $600. If those conditions are met, AMD shareholders may be getting huge revenue growth alongside the dilution.
Insider Monkey’s database showed 165 hedge funds with long positions in AMD at the end of Q2 2026, up 23% from 134 in Q1. Marshall Wace held about 3.90 million shares after increasing its position 3% during the quarter. Those filings predate Morgan Stanley’s August note. Short interest stood at 37.75 million shares on July 31, or about 2.3% of float, with 1.3 days to cover.
At roughly 42 times forward earnings, AMD is already priced for major AI success. The OpenAI and Meta wins strengthen that case, but the economics suggest investors should distinguish market-share gains from profitable market-share gains.
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