Advanced Micro Devices, better known as AMD, is in advanced talks to acquire its competitor in the semiconductor industry, Xilinx, in a deal that is said to be worth more than $30 billion. The news comes less than a month after Nvidia announced its own acquisition of Softbank-owned Arm Holdings for $40 billion. Intel are you taking notes?
Although there is hope amongst insiders of getting the acquisition completed as early as next week, the fact that talks have previously broken down between the two companies means it’s far from a done deal.
2020 has been a breakout year for AMD, with its share price almost doubling since January. By using its stock in the acquisition, it could capitalize on its recent run-up.
Xilinx stock jumped as much as 16% in pre-market trading in anticipation of the deal, while AMD stock is down about 2%.
What does the deal mean for Intel?
The deal is a direct call-out to Intel, AMD’s closest rival. AMD produces chips for a number of industries, including personal computers, gaming consoles, and data centers. Of these industries, Intel holds a dominant position in personal computers and data centers which is now being eaten away by AMD. According to Mercury Research, AMD had a 20% market share of personal computer CPUs midway through 2020, this figure is up from 8% three years ago.
The deal with Xilinx, if completed, will give AMD a stake in the Field Programmable Gate Array (FPGA) market. FPGAs are used in emerging technologies like 5G, military communications, and radar. The other big player in the space? You guessed it: Intel.
It’s clear that AMD are coming for Intel’s lunch on a number of different fronts, with the Xilinx deal potentially adding a new element to its challenge. Wall Street has shown what horse it’s backing with AMD stock up 76% year-to-date while Intel is down 12%. However, at a $225 billion market cap, Intel is still a giant in the space and AMD has a long road if it is to take the top spot, but the Xilinx deal could be a step in the right direction.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Content Manager at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.