AMD, Nvidia rivalry enters frosty new chapter in battle for AI dominance

Driving the news: After AMD announced a deal earlier this week to give OpenAI up to 10% of itself, Nvidia CEO Jensen Huang Wednesday morning suggested that it was a "clever" deal ... with one big caveat.

• "It's imaginative, it's unique and surprising, considering they were so excited about their next-generation product," Huang told CNBC. "I'm surprised that they would give away 10% of the company before they even built it."

The intrigue: Nvidia and AMD have both announced deals with OpenAI in the last two weeks.

• AMD's stock soared 24% Monday after it unveiled its multi-year deal to deliver 6 gigawatts of GPUs to OpenAI to power its AI infrastructure.
• Nvidia in September announced an investment of up to $100 billion in OpenAI, enabling the company to stand up at least 10 gigawatts of AI data centers.

Follow the money: The Nvidia investment called attention to an emerging loop in which the chip designer invests in OpenAI, which buys data software from Oracle, which gets chips from Nvidia, and so on.

• AMD wanted a lucrative loop of its own. (The company did not respond to a request for comment on Huang's remarks.)
• Wedbush Securities analyst Dan Ives, in a research note, called the whole thing an "AI Arms Race" that's becoming a "1996 Moment for the tech world."

The bottom line: AMD is nipping at Nvidia's heels, but its market cap remains less than 1/10th that its larger rival's.