AMD stock: Boost in chip highflyer

by Klaus Schachinger, Euro on Sunday

Dhe largest takeover in the chip industry is wrapped up. AMD acquires Xilinx, the leading developer of programmable chips. The deal is valued at $50 billion. The Xilinx semiconductors can be programmed via software for special tasks, such as the algorithms of artificial intelligence, which evaluate large amounts of data in data centers at lightning speed.

With the portfolio of the US group with estimated sales of 3.9 billion dollars in the fiscal year up to the end of March, AMD has “better access to markets with sales potential of 135 billion dollars,” explained AMD boss Lisa Su. The Xilinx portfolio includes chips in network computers from cloud service providers and for IT and telecom networks, where large-scale data analyzes should also be possible in the future with 5G on the periphery, i.e. on the end devices.

Second major milestone

With the digitization of industry, including the automotive industry, there are many potential uses for Xilinx chips. The company would also have liked to have AMD’s competitor Intel in its portfolio. For AMD, the acquisition is the next major milestone in diversifying its business and strengthening its competitiveness with Intel, its much larger neighbor in Santa Clara, California.

AMD finances the purchase exclusively with its own shares and thus protects the reserves. Xilinx shareholders will receive 1.73 AMD shares for each share. You benefit from the significant price increase at AMD since the offer was published on October 27, 2020. At that time, the deal was still valued at 35 billion dollars.

“As the #1 leader in adaptive computing, Xilinx complements our technology in microprocessors and will transform AMD overall,” said electrical engineer Su. She has a doctorate in semiconductor technologies. The purchase will have a positive impact on the balance sheet in the first year.

Technologically ahead

The first major change Boss Su pushed through was outsourcing manufacturing to service providers like Taiwan Semiconductor Manufacturing Company (TSMC). Technologically, the leading contract manufacturer is far ahead of Intel. AMD uses this to develop chips that are manufactured with smaller conductor track diameters. This makes them more powerful and energy-efficient than Intel semiconductors. The challenger is constantly chasing market shares from the Primus.

The recently presented balance sheet for the 2021 financial year was significantly better than expected and delighted investors. For 2022, analysts – not considering Xilinx – expect a good $24.7 billion in revenue, 15 percent more than in the previous year, and $6 billion in net profit, a fifth more.

Meanwhile, the financially strong giant Intel disappointed with its recently presented balance sheet. Intel’s manufacturing technology was once the best in the industry. Now the group is investing billions to catch up. The announced purchase of the Israeli chip contract manufacturer Tower Semiconductor for 5.4 billion dollars is one of them. That won’t slow AMD’s rise.

updraft: News about a speedy integration of Xilinx should give the price a lasting boost. Get in.

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Image sources: AMD Global