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AMD to buy Xilinx in $35B deal, expanding chip business

Yahoo Finance’s Dan Howley joins Kristin Myers to discuss how AMD agreeing to buy Xilinx is a chipmaker mega-deal.

Video Transcript

KRISTIN MYERS: Dan Howley. So Dan, talk to us about AMD And this new deal to buy Xilinx for about $35 billion.

DAN HOWLEY: Yeah, this is an all-stock deal for AMD to purchase Xilinx. And essentially, what it does is it gives AMD more weapons in its arsenal against its fight against Intel. Essentially, what AMD is doing right now is they're beating Intel as far as technology goes, in and of itself, in the CPU space.

They're ahead of them, as far as the chip-manufacturing process. They have a smaller chip size that allows for more transistors in a smaller space that saves on energy than Intel. Intel's been stuck at the same chip size for quite some time, and that's why they were down 10%, because there were further delays in their chip-manufacturing process. And so AMD has been ahead of them.

The energy aspect of this-- the energy consumption aspect-- is important for data centers because data center providers don't want to be shelling out a ton of money to power the centers, which do take up a ton of energy. So the fact that AMD is ahead of Intel is a big boon for them.

They've been doing this for some time now, and the addition of Xilinx allows them to kind of move out into additional areas. So Xilinx creates these kinds of processors that can be used after-- or kind of programmed after they're built. So when you build something like a CPU or a GPU, a graphics processing unit, it's for that purpose, that expressed purpose.

But with Xilinx, they're making chips that are not for an expressed purpose, that can be repurposed into different areas. So that's really helpful for AMD to jump into different areas, like your AI, like automotive, transportation, defense, sectors like that. And that's really where they're going to see the benefits here. And the data center is going to be the first place where it really starts to take hold.

So I think for AMD, this is a big deal. For Intel, it definitely means they have to be looking over their shoulders more. But they still are the 800-pound gorilla in the room. They're the big dog there. And don't forget, Nvidia is also a part of this space, and they're working their way through their purchase of Arm. That still may have some regulatory roadblocks as far as Europe and China goes. But if they do, they'll be another fighter that will take Intel to task on its leadership in the data center space.