In the 1990s, when Intel dominated the PC chip market, the semiconductor maker needed Advanced Micro Devices to exist as a viable No. 2 to help avoid being charged with monopolistic behavior. 

Almost three decades later, AMD may be serving a similar role for Nvidia, which controls over 90% of the market for graphics processing units used for artificial intelligence workloads. 

When AMD announced a deal on Monday that involves selling many billions of dollars worth of GPUs to OpenAI, it announced itself as a serious rival the can pick up share in the quickly growing market for AI chips, analysts said.

“Right now, Nvidia almost has a monopoly, with AMD having a low-single-digit share in the $250 billion market” for AI data center silicon, said Mandeep Singh, senior analyst at Bloomberg intelligence.

Up to this point, Nvidia and OpenAI have defined the new era of AI.

Nvidia’s GPU sales have pushed the company’s market cap to $4.5 trillion. OpenAI’s private market valuation has climbed to $500 billion, driven by the popularity of ChatGPT and the company’s hyper-aggressive plans for building out data centers.

Nvidia is a significant investor in OpenAI, and last month agreed to pour up to $100 billion into the AI startup’s infrastructure buildouts.

While AMD is a very distant challenger, the stock has also been a Wall Street darling because of the company’s promises in AI and expectations that its GPUs will be enthusiastically snapped up by customers. But until its announcement with OpenAI this week, AMD’s rally has largely been built on hope.

AMD’s stock soared 24% on Monday, its biggest gain since 2002. It’s up 89% this year compared to Nvidia’s 40% gain.

Nvidia’s control of the burgeoning market has been so vast that in September of last year, during the waning days of the Biden administration, the company was reportedly subpoenaed by the Justice Department, though it denied the report. Sen. Elizabeth Warren, D-Mass., sent a letter to the DOJ’s antitrust unit at the time supporting a probe.

The company’s growth, she wrote, “has been supercharged by Nvidia’s use of anticompetitive tactics that have choked off competition and chilled innovation.” Nvidia said at the time that it wins on merit.

The deal OpenAI and AMD announced on Monday could change the competitive dynamic.

The tie-up is expected to bring “double digit billions” in revenue to AMD starting in the second half of next year. OpenAI could also end up owning 10% of AMD if the stock hits price targets over a period of years.

AMD CEO Lisa Su described the agreement as a “win-win” on a call with reporters, and said it’s proof that her company’s chips are fast enough and priced to compete with those from Nvidia.

She described OpenAI’s commitment as a “clear signal” that AMD’s GPUs and software offer the performance and economic value “required for the most demanding at-scale deployments.”

Nvidia CEO Jensen Huang said on CNBC’s Squawk Box on Wednesday that the OpenAI-AMD deal was “unique and surprising.”

“I’m surprised that they would give away 10% of the company before they even built it,” Huang said.
“It’s clever, I guess,” Huang said.

The pact also allows OpenAI to show that its contracts and investments with suppliers like Nvidia aren’t exclusive, to avoid any potential antitrust ramifications. OpenAI CEO Sam Altman said on social media that any AMD chips would be “incremental” to its Nvidia purchases, and that the “world needs much more compute.”

“None of these things are, as far as I’m aware, exclusive contracts tying up avenues to other competitors,” said Alden Abbott, senior research fellow at Mercatus Center and a former general counsel at the Federal Trade Commission. “I don’t see any argument that in the near term that shows monopolization or cartelization of AI suppliers.”

Representatives from Nvidia, AMD and OpenAI declined to comment.

Rather, semiconductor investors are worried about potential tariffs, specifically Section 232 tariffs focused on chips. President Donald Trump has said that the tariffs, which have yet to go into effect, will double the price of imported chips. But in August, the president introduced a big carve-out.

“If you’re building in the United States or have committed to build — without question committed to build in the United States —there will be no charge,” Trump said at an event to announce Apple investments. The Trump administration’s AI Action Plan pushes for the U.S. to export “full-stack” AI technology abroad so it can become the global standard.

Ed Mills, Washington policy analyst at Raymond James, said it’s not entirely clear what will qualify for the exemption, adding that OpenAI’s investment in AMD may end up being an “off ramp” for the company.

Nvidia and OpenAI have already played a big role in Trump’s AI ambitions, as they joined with Oracle in January, when the president announced Project Stargate, a plan to invest up to $500 billion in U.S. AI infrastructure.

In the AMD deal, OpenAI will be using the company’s Instinct MI450 systems, which will start shipping next year. It’s the first time AMD has offered a “rack-scale” system, not just individual chips, and will mean AMD is the only company besides Nvidia offering a full stack of AI hardware technologies.

“By having OpenAI purchase as much as they are from AMD, now we have a a multiplayer race that seems to be kind of dominated by Nvidia,” Mills said. “So we’re expanding the number U.S. companies that are going to be able to compete in producing that U.S. tech stack.”

There’s also the China issue.

Both Nvidia and AMD have China-specific AI products that have been barred by the U.S. government for shipment to the world’s second-largest economy, which is a major center of AI research. The Trump administration reversed course over the summer, and said the companies could export chips if they paid the U.S. government 15% of the revenue, but they still need export licenses.

Trump is expected to meet with China’s president, Xi Jinping, at the Asia-Pacific Economic Cooperation forum later this month. Recent reports suggest China could commit to investing $1 trillion in the U.S., and Mills said high-priced AI chips could be part of the deal.

AMD has historically downplayed competition with Nvidia, instead pointing to the potential opportunity in AI. The company recently said the AI chip market could be worth $500 billion by 2028, and this week said the OpenAI deal equates to at least “tens of billions of dollars of revenue.”

“I think they can get to 15% to 20% market share in a $500 billion market, whereas previously they had no chance,” said Bloomberg’s Singh.

The Trump administration may not be so concerned about antitrust matters, but Nvidia and AMD are at the early stages of a battle that’s expected to play out over many years, and there’s no telling who will be in the White House after Trump’s second term ends.

Antitrust regulators have paid close attention to the market in the past. The last time AMD played second fiddle in chips it was Intel that was the industry behemoth.

The FTC opened an inquiry into Intel in 1991, looking into potential anticompetitive practices in the PC market, and AMD filed a $2 billion antitrust suit against the company that year. The FTC never brought charges, and AMD and Intel ultimately settled their case.

Now AMD is worth about twice as much as Intel. And, after a spate of dealmaking, Intel’s largest shareholder is the U.S. government, followed not far behind by Nvidia.

WATCH: OpenAI’s deal spree

Nvidia CEO Jensen Huang said Wednesday that the U.S. is “not far ahead” of China in the artificial intelligence race, and that the country needs a “nuanced strategy” to stay on higher ground.

Huang has been walking a tense line between the two countries and has praised China’s AI models, including DeepSeek, Alibaba, and Baidu. Although U.S. models remain more advanced, China’s open-source models are “well ahead,” Huang said.

The CEO courted China in July with several trips following U.S. chip restrictions and warned that Chinese chip systems from companies like Huawei should not be discounted.

President Donald Trump spoke to Chinese President Xi Jinping on a call in September and announced plans for the pair to meet at the APEC South Korea summit at the end of October.

Here are five key things Huang said about the AI race on CNBC’s “Squawk Box.”

Nvidia, widely regarded as the leading AI chip manufacturer, announced in September plans to invest up to $100 billion in OpenAI to build out AI data centers. However, these large investments in computing power require a massive amount of energy, which China far outpaces the U.S. in production.

China generated a total of 10,000 terawatt hours, or one trillion watt hours, of electricity in 2024, over double the U.S.’s output, according to the Energy Institute.

While the U.S. may be leading in advanced chip designs, including Nvidia’s Blackwell processor, China’s tech giant Huawei has been adding pressure with its plans to launch its new computing systems to power its in-house Ascend chips as soon as next year.

China reportedly prohibited tech companies from using Nvidia chips, instead focusing on advancing domestic chips to challenge Nvidia processors. Alibaba and Baidu reportedly began using internally designed chips to train AI models.

Huang said that China’s under-regulation at the industrial level makes the country “quick in adopting new technology.”

According to a China State Council directive, the country is aiming for AI adoption to reach 70% of the population by 2027 by imbuing various agents and other applications across core industries.

“I hope that American companies in American society are going to be fast in adopting AI applications, because ultimately this industrial revolution wins at the AI application layer, at the diffusion layer,” Huang said.

China holds 50% of the world’s AI researchers and 30% of the technology market, Huang said.

The country’s stocks have seen a strong rally as confidence climbs in its chip progression and AI development. China’s market has seen a huge boom as tech companies see share prices grow over triple digits in the past year.

Alibaba stock rose by almost 180% year to date, while electronics giant Xiaomi saw shares increase by 125%.

Huang pointed to developing the American tech stack to win AI developers and markets globally and warned the U.S. would fall behind if American technologies are not allowed to “diffuse and be proliferated around the world.”

The CEO referenced comments from White House AI advisor David Sacks about the tech landscape in five years.

“If America, the American tech stack, is 80% of the world, then we are doing a good job winning the AI race. If the United States is 20% of the world, then we’ve lost the AI race,” Huang said.

Huang also referred to companies like Azure, CoreWeave, and Anthropic AI as playing a key part in revolutionizing the entire tech stack.

Nvidia CEO Jensen Huang said Wednesday that he’s surprised Advanced Micro Devices offered 10% of itself to OpenAI as part of a multibillion-dollar partnership announced earlier this week.

“It’s imaginative, it’s unique and surprising, considering they were so excited about their next generation product,” Huang said in an interview with “CNBC’s Squawk Box.” “I’m surprised that they would give away 10% of the company before they even built it. And so anyhow, it’s clever, I guess.”

OpenAI and AMD reached a deal on Monday, with OpenAI committing to purchase 6 gigawatts worth of AMD chips over multiple years, including its forthcoming MI450 series. As part of the agreement, OpenAI will receive warrants for up to 160 million AMD shares, with vesting milestones based on deployment volume and AMD’s share price.

If OpenAI exercises the full warrant, the company could acquire roughly 10% ownership in AMD.

AMD shares have soared since the announcement and were up 5% Wednesday, rising a staggering 35% so far this week. Nvidia shares were nearly 3% higher on Wednesday following Huang’s comments.

The deal challenges Nvidia’s dominance in the AI chip industry, a market where AMD has sought to catch up, alongside cloud providers which are developing their own chips.

Nvidia late last month announced it planned to invest up to $100 billion in OpenAI over the next decade. OpenAI agreed to build and deploy Nvidia systems that require 10 gigawatts of power, which Huang said at the time of the announcement is equal to between 4 million and 5 million graphics processing units (GPUs).

Huang said the investment is “very different” from OpenAI’s deal with AMD in that it allows Nvidia to sell directly to the ChatGPT creator.

Nvidia’s investment in OpenAI has underscored concerns about the “circular nature” of some AI infrastructure deals.

Asked how OpenAI will fund the deal with Nvidia, Huang said, “They don’t have the money yet.”

“They’re going to have to raise that money through, first of all, their revenues, which is growing exponentially, equity or debt,” Huang said. “They gave us the opportunity to invest alongside other investors when the time comes.”

Huang added that after Nvidia previously invested in OpenAI, his “only regret is that we didn’t invest more.”

Huang also confirmed Nvidia’s involvement in xAI’s latest funding round, in which Elon Musk’s AI startup is reportedly seeking to raise about $20 billion, according to Bloomberg. He said he’s “super excited” about the financing opportunity, adding that he wishes he could give Musk more money.

“Almost everything that Elon is part of, you really want to be part of as well,” Huang said.

Nvidia has also backed AI data center operator CoreWeave, which Huang said he considers one of several “terrific investments” made by the company recently.

“[They’re] really special companies, and they’re building, they’re part of our ecosystem building out the AI infrastructure for the world,” Huang said.