As part of the deal, Mubadala Development Co., also based in Abu Dhabi, will pay $314 million to increase its stake in AMD from 8.1% to 19.3%.

"We are joining with the Advanced Technology Investment Co. to create a brand new company -- one that epitomizes a new global enterprise with talent and resources from around the world," said , AMD's president and CEO, in a conference call this morning. "This will result in a financially stronger and more focused AMD."

Although AMD will be The Foundry's first customer, it will build chips for other companies as well.

Doug Grose, senior vice president at AMD and the incoming CEO of The Foundry, said in a conference call Tuesday that ATIC has promised to invest between $3.6 billion and $6 billion over the next five years to fund an expansion of The Foundry's chip-making capacity. The plan includes going forward with a planned capacity expansion at a fab facility in Dresden, Germany, next year.

Lau, however, noted that all the influx of cash does not erase all of AMD's debt. The company has been carrying about $5.4 billion in debt, so the deal will leave it with $3.3 billion in debt. "There is still a lot of debt but the cash burn to maintain the fabs is no longer there," he added. "We believe this is well received as a positive for the company going forward."