Abu Dhabi's Mubadala Investment company has sold 34.9m shares in AMD, worth around $842m at market prices.
Mubadala, which is the third largest shareholder in the chip manufacturer, has also converted 75 million share warrants, which will mean it retains a 6.9% stake in AMD. The conversion of the warrants will provide $448.5m to AMD.
Following the news of the Mubadala sale, AMD's share price slipped by 3% on Tuesday.
"Today's transaction remains in line with Mubadala's overall investment strategy to monetise mature holdings to deliver attractive commercial returns," said Brian Lott, a Mubadala spokesman. "We have had a long-standing relationship with AMD over the past decade and remain among the company's top shareholders. We are proud of our partnership with AMD and are confident in the management team's ability to execute against their technology road map and deliver innovative products to the market."