RXT Stock Surges 25% Premarket – What’s The Connection Between Rackspace’s Latest Pact With AMD And Its Workforce Reduction?

Rackspace announced an agreement with AMD for chips to power its data centers and to fund the project, the company is cutting 15% jobs across the board.

• The companies signed an agreement for 30 megawatts of AMD-based compute power deployments.
• Separately, in an SEC filing, Rackspace said its board has approved “a workforce realignment plan” to cut costs and redirect resources towards building an enterprise AI infrastructure in collaboration with AMD, among other things.
• AMD will provide its GPUs, including MI355X and MI350P, and its “EPYC” CPUs to power Rackspace’s data centers worldwide.

Shares of Rackspace Technologies (RXT) surged on Tuesday after the cloud solutions company signed a significant pact with chipmaker Advanced Micro Devices (AMD) for phased deployments of up to 30 megawatts of compute power.

Separately, in an SEC filing, the company announced it will cut 15% of its global workforce, and costs saved from that will be used to fund its project with AMD, among other things. At the time of writing, RXT stock was up 25% premarket and was among the top 10 trending tickers on Stocktwits.

The Agreement In Focus

Following the signing of a memorandum of understanding in May this year, the companies have entered into a definitive agreement for AMD to provide its GPUs, including MI355X and MI350P, among others, and its “EPYC” CPUs to power Rackspace’s data centers worldwide, starting later this year and continuing through 2028.

The soaring demand for artificial intelligence has led hyperscalers and other companies to aggressively compete in building out data center infrastructure to power the resource-intensive technology, triggering shortages of chips, memory, optical and networking components, and all-time-high global energy consumption.

AMD And RXT: Serving Enterprise Customers 

Rackspace said the additional capacity from AMD will serve its enterprise customers, especially in the healthcare space, who have expressed early interest in accelerated compute for clinical AI and inference at scale. The companies will also work together to find more customers in other industries who need compute for their workloads.

“As enterprise AI evolves, customers need infrastructure that can deliver the right mix of accelerated and general-purpose compute for each workload,” said Dan McNamara, senior vice president and general manager, Compute and Enterprise AI, AMD. “By bringing together leadership AMD AI compute solutions and Rackspace’s governed cloud operating model, we are helping regulated enterprises deploy high-performance AI infrastructure with the openness, scalability and accountability needed to run AI at enterprise scale.”

Job Cuts At RXT

Rackspace said its board approved “a workforce realignment plan” to cut costs and  redirect resources from its public cloud business unit, including towards building an enterprise AI infrastructure in collaboration with AMD.

The company will take a one-time charge of up to $19 million for severance payments, healthcare benefits, and other termination-related costs, and the cuts will generate up to $85 million in annualized run-rate savings.

The savings will also be reinvested in areas like forward-deployed engineering and AI solutions delivery, the company said.

What Do Retail Traders Think About RXT And AMD?

On Stocktwits, retail sentiment about the RXT stock turned ‘neutral’ from ‘bearish,’ while it remained ‘bearish’ on AMD over the last 24 hours.

One user on the platform said “30MW will translate into an average $300M annual revenue” for RXT.

View this Stocktwits post

Another user said the savings from RXT’s 15% job cuts will “pay for a large portion of the debt interest payments.”

View this Stocktwits post

Both RXT and AMD stocks have more than quadrupled in value over the last 12 months, outperforming the S&P 500.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<