AMD announced on Monday, September 28, that it will acquire San Francisco-based AI research lab World Labs in an all-stock transaction valued at approximately $8.2 billion, with the deal expected to close by the end of 2026 pending regulatory approvals. World Labs develops spatial intelligence world models that use text, images, and video to generate and simulate interactive 3D environments; its co-founder and CEO, AI researcher Fei-Fei Li, will join AMD as executive vice president and chief scientist. AMD CEO Lisa Su said the acquisition is aimed at co-designing hardware, software, and systems for emerging AI applications including robotics and physical AI. AMD estimates the physical AI market could reach $200 billion by 2035, according to Futurum Group research director Brendan Burke.
The acquisition positions AMD to inform low-level chip architecture decisions based on how next-generation AI models, particularly world models focused on geometry, physics, and 3D environments, will require different compute and memory configurations than current large language models. Nvidia already holds an early lead in physical AI through its Cosmos, Isaac, Omniverse, and Project GR00T platforms, making AMD's move a direct competitive response in a market segment that has yet to produce significant commercial revenue.
AMD acquiring World Labs and framing it as a shift toward physical AI is a significant named-company deal with direct implications for AI compute infrastructure buildouts. The involvement of a major chip vendor in a new AI modality makes this a strong AI & Compute selection.