Xilinx Acquisition Could Further Cement AMD’s Status as a Chip Powerhouse

Advanced Micro Devices (AMD) has been breathing down rivals Intel and Nvidia’s neck for a while, and it looks as if the traditionally smaller chipmaker is not about to back off any time soon.

AMD is reportedly in advanced talks for a $30 billion takeover of semiconductor peer Xilinx (XLNX). Apparently, barring any kinks in the process, an agreement could be sealed even as early as this week.

Xilinx makes field programmable gate array (FPGA) chips, which it pioneered back in the 1980s. With over $3 billion in annual sales, the company leads the flexible chips’ market.

These are used in several segments across the semiconductor industry, including cloud computing, 5G network infrastructure, and artificial intelligence.

Rosenblatt analyst Hans Mosesmann believes the deal makes sense for AMD. The 5-star analyst argues “given Xilinx shares have been relatively distressed” over the past 18 months, the “valuation is actually quite reasonable.”

Considering the industry’s pivot over the last two years toward AI centered tech, alongside Nvidia’s recent Mellanox acquisition and anticipated takeover of UK-based chip designer Arm, Mosesmann believes the move is one which keeps AMD competitive in a changing landscape.

“AMD’s move is strategic and at the same time necessary to counter data center dynamics that a strong CPU and GPU portfolio is not alone enough to stay in the game longer term. Xilinx brings exposure, relationships, and secular power for AMD in networking, acceleration (great inferencing positioning) and storage growth vectors, edge strength, and, importantly, diversification into 5G, industrial, and automotive segments that we see adding as much as 50% $TAM for the company,” Mosesmann opined.

Accordingly, Mosesmann’s rating on AMD stays a Buy, while the $120 price target stays put, too. Upside from current levels is a healthy 42%. (To watch Mosesmann’s track record, click here)

What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 12 Buys, 13 Holds and 1 Sell add up to a Moderate Buy consensus. With an average price target of $84.04, the Street anticipates shares to stay range-bound for now. (See AMD stock analysis 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.