Advanced Micro Devices (NASDAQ: AMD) has announced plans to invest more than $10 billion in Taiwan, a move that will have significant implications for the global semiconductor ecosystem. But what exactly is AMD buying with that money?

Expanding Manufacturing Capacity

The investment is not solely focused on Taiwan Semiconductor Manufacturing (NYSE: TSM), as it may seem at first glance. Instead, the money will be spread across Taiwan’s broader semiconductor ecosystem, including advanced packaging, chip substrates, and manufacturing capacity for complete artificial intelligence (AI) systems. These investments are expected to run through 2029 and will help AMD’s partners scale production of next-generation products, such as its Helios AI racks.

This strategic move is aimed at ensuring AMD can manufacture enough hardware to meet the rapidly growing demand for AI. As the company’s CEO, Lisa Su, explained, the investment is crucial for AMD to stay ahead of the competition in the AI market. The company’s next AI bottleneck may not be the GPU, but rather the ability to package and assemble enough chips to meet customer demand.

Advanced Packaging and Substrates

AMD is already working with TSMC on advanced packaging technologies, such as the SoIC-X and CoWoS-L. The company is also developing next-generation Elevated Fanout Bridge (EFB) chip packaging with ASE Technology and Siliconware Precision Industries. Additionally, AMD has completed testing of a panel-based version of its EFB packaging technology with Powertech Technology.

By expanding its supplier ecosystem beyond TSMC, AMD is diversifying its risk and ensuring a steady supply of advanced packaging and substrate materials. This move will also help the company to meet the growing demand for AI chips, which require complex packaging and assembly processes.

AI Growth and Capacity

AMD’s Data Center revenue has been growing rapidly, reaching $6.7 billion in the second quarter, a 107% year-over-year increase. This business accounts for about 58% of AMD’s total revenue, and management expects it to grow at a compound annual growth rate (CAGR) of above 60% over the next three to five years, with a CAGR of more than 80% for data center AI.

To achieve this growth, AMD will need to significantly expand its manufacturing capacity and supply chain. The company’s Helios AI rack contains 72 Instinct MI455X GPUs and 18 Venice CPUs, and OpenAI, Meta Platforms, and Anthropic have announced AMD deployments that could total as much as 14 gigawatts. However, these deployments will occur over several years.

Capital Requirements

Despite being a fabless company, AMD still requires significant capital to secure supply. In the first half of 2026, the company purchased only $1.2 billion of property and equipment, but it exited the second quarter with $30.3 billion of broader unconditional commitments, primarily covering wafers, substrates, components, cloud capacity, software, and technology licenses.

AMD has also recorded a roughly $1 billion increase in prepaid expenses and other assets, mainly due to advance payments under supply agreements in the first half of 2026. This significant investment in Taiwan will help the company to meet the growing demand for AI chips and maintain its competitive edge in the market.

Ultimately, the success of AMD’s $10 billion investment in Taiwan will depend on the company’s ability to drive profitable AI growth. With a non-GAAP operating margin of 27% in the second quarter, significantly lower than the management’s target of more than 35% over the next three to five years, CEO Lisa Su is spending billions to ensure AMD can produce enough AI hardware to meet customer demand.