Shares of Rackspace Technology spiked after the cloud computing company finalized a deal to use chips from Advanced Micro Devices in its data centers.

The agreement locks in a memorandum of understanding from May, establishing AMD as the main hardware provider for Rackspace's AI cloud. The companies will begin rolling out 30 megawatts of computing capacity later this year, with full deployment expected by 2028. Central to the deal are AMD's Instinct GPUs, designed specifically for heavy AI workloads, and its EPYC CPUs for general data processing.

Rackspace shares surged 28% to $7.57 in Tuesday's premarket session. AMD was up 0.3%, narrowly outpacing tech-heavy Nasdaq futures.

News of the deal came a day after AMD said it was buying memory-optimization company MEXT to mitigate rising memory prices. Heading into Tuesday's session, shares have more than doubled in 2026, propelled by demand for the company's AI chips and prospects to snap up further market share.

Rackspace has risen even higher, gaining over 500% this year alone. The shares face a long road to recovery -- in spite of this year's rally, they remain well below the highs they reached following Rackspace's initial public offering, even falling below $1 earlier this year.

But the stock has begun to claw its way back, fueled by optimism around Rackspace's pivot into AI cloud services. That shift marks a notable departure from 2020, when Apollo Global Management took Rackspace public under the broader banner of an "end-to-end multicloud technology services company."

Whether the AI momentum continues remains to be seen, but securing a partnership with a silicon heavyweight like AMD suggests the market is taking this new Rackspace seriously.