With the ink having barely dried following the Xilinx acquisition, last week, Advanced Micro Devices (AMD) disclosed that it intends to bring networking startup Pensando under the fold, in a deal said to be worth $1.9 billion.
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While Wells Fargo’s Aaron Rakers thinks the revenue contribution from the company is likely to be “small,” the analyst believes the “strategic (data center) merits of this acquisition are meaningful.”
So, where does Pensando fit in the AMD portfolio? Well for one, Rakers thinks the acquisition “validates the evolution toward disaggregating data center architectures in which certain workloads are being repositioned away from the general purpose CPUs to an accelerated Data Processing Unit (DPU).” And this should give the chip giant’s data center strategy added depth, although how this differs to AMD/ Xilinx’s SmartNIC solutions (Alveo) is still not entirely clear.
Pensando also joins the AMD stable boasting an excellent client list. Customers using its services include Microsoft Azure, Oracle Cloud, IBM Cloud, and others—and all point to the merits of the company’s P4 programmable processors and hyperscale software stack offerings. The fact that Pensando also has an “impressive list” of executives/ investors/advisors with Cisco background doesn’t hurt its case either.
Lastly, with the data center segment evolving toward “workload re-distribution,” Rakers also highlights VMware’s Project Monterey as an “important consideration.” Pensando is collaborating with VMware on the development of a platform which aims to support the “shifting requirements” of next-generation applications. The project was announced in Sept 2020, and Rakers anticipates that the product will become available sometime this year.
So, down to business, what does this all mean for investors? The 5-star analyst rates AMD shares an Overweight (i.e. Buy) along with a $180 price target. Should the figure be met, investors will be pocketing returns of ~84%. (To watch Rakers’ track record, click here)
Looking at the consensus breakdown, based on 13 Buys vs. 8 Holds, the analysts’ view is that this stock is a Moderate Buy. However, even most of those on the fence think the shares are undervalued and as such, the $147.39 average target makes room for 46% growth over the one-year timeframe. (See AMD stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
