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AMD buys Xilinx in $35B deal

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Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Jared Blikre discuss AMD buying rival chipmaker Xilinx in an all-stock deal.

Video Transcript

ALEXIS CHRISTOFOROUS: There is some encouraging news here for investors to cling to this morning, namely a landmark deal in the semiconductor space. AMD is buying rival chipmaker, Xilinx, in a $35 billion all-stock deal. This is just the latest in a string of acquisitions in the chip industry, and it raises the stakes in AMD's battle with Intel for market dominance. Yahoo Finance's Jared Blikre has his eye on this big merger this morning, and he joins us now. So Jared, what do we need to know about this all-stock deal?

JARED BLIKRE: Well, this is a game changer. This is a really big deal because AMD has just been eating Intel's lunch, especially in the server business. And when the deal was announced earlier this morning, and by the way, AMD also reported earnings this morning, a little bit earlier than expected. They were supposed to report after the bell.

But the stock, AMD stock, dipped a bit, but it's up about 29 basis points right now in the premarket. And you can see over the last six months, it is up about 46%, relatively speaking, just going sideways over the last three months or so. If you take a look at Xilinx here, it's up 14%. And AMD is putting-- it is paying a premium of about 25% on this deal.

So when the deal was first leaked by Dow Jones earlier in the month, we saw this big jump here. That was about 16%. And so that's an additional 25%. So the shareholders at Xilinx should be nice.

And just taking a look at AMD. This company really has pivoted. There has been kind of a transformation in the industry where they're really not making their own chips anymore or fabricating them.

AMD outsourced that operation years ago, and they used principally Taiwan semi, and so that's kind of the new business model. And along those lines, by the way, Intel, which was down about 10% after its earnings Friday, said that it may outsource some of its 7-nanometer production as well. So lots of competition here.

And I'd also say that just a couple of weeks ago, Nvidia announced that it was going to pay $40 billion for Arm Holdings, and that is the British mobile phone chip design giant that is backed by SoftBank Group. So lots of shakeups in the industry here. And lots of competition in the new pandemic norm.

ALEXIS CHRISTOFOROUS: Yeah, lots of consolidation, right, as this pandemic drives the need for a lot of the chips these companies make. I want to bring Brian in here for a minute, because Brian, when you look AMD's CEO, Lisa Su, making one big move after another, what do you make of her performance? And what do you make of Intel's prospects, used to be a leader in this space?

BRIAN SOZZI: Alexis, here's the #shareablefunfact today with regards to Lisa Su. When she took over in 2014, AMD was pretty much left for dead. Market cap $2 and 1/2 billion. Right now, AMD's market cap is at about $97 billion, according to Yahoo Finance's premium data, and she has completely reinvented the company.

Under her tenure, she's had a mystique. She's rebranded the chips, and she has outsourced the manufacturing, like Jared noted. Now, with this acquisition, it's about building a legacy. And I think Xilinx will very much help her cement that legacy in Silicon Valley.