Advanced Micro Devices (NASDAQ:AMD) is in talks to acquire rival chipmaker Xilinx in a deal estimated to be over $30 billion according to people familiar with the deal. This marks the latest large tie-up in the semiconductor industry that is quickly consolidating.
AMD to acquire Xilinx in another consolidation in the semiconductor sector
According to the Wall Street Journal, a deal could be put together as early as next week. However, there are no guarantees that the deal could get through considering the talks recently stalled before resuming according to sources. AMD has witnessed a surge in demand for its products in recent times, driven mainly by the surge in demand for chips. This is due to the shift to remote working in the wake of the pandemic, and its market share has been gains compared to that of its top competitor, Intel Corp (NASDAQ:INTC).
Currently, AMD’s market value is around $100 billion, following a surge of 89% on its stock this year due to an increase in demand for PCs, gaming consoles, and devices using its chips in the wake of COVID-19. The company saw its revenue jump 26% to $1,93 billion in the second quarter, with net income increasing fourfold to around $157 million. This was driven mainly by record server processor and notebook sales.
The allure of AMD’s stock could boost a deal
The soaring AMD shares could boost the acquisition’s chances as it can use the stock as currency. Currently, the California-based Xilinx market value is $26 billion, and its stock is up by 9% year to date, ahead of the industry average of 7%. A typical premier takeover could value Xilinx at roughly $30 billion.
Xilinx manufactures programmable chips that are mostly used in data centers to enhance the speed of tasks like AI and in 5G telecom base stations. The banning of Huawei Technologies from doing business with US companies greatly affected Xilinx’s business because the Chinese company was its main customer. With more Chinese companies blacklisted, the business has greatly been affected.