Hey Global Investor, here’s what you need to know before the US markets open.
Market Snapshot ?
- S&P 500 (Tuesday Close) 3,390.68 −10.29 (0.30%)
- NASDAQ (Tuesday Close) 11,431.35 +72.41 (0.64%)
- FTSE 100 (5 PM IST) 5626.93 -102.06 (1.78%)
- NIFTY 50 (Today’s Close) 11,729.60 −159.80 (1.34%)
- USDINR (5 PM IST) 73.90 (1 Year +4.07%)
Lisa Su’s Masterstroke – AMD buys Xilinx
AMD is using its soaring share price to build a broader business portfolio to end Intel’s longtime dominance.
Background: When Lisa Su became the CEO of AMD six years back, the company was teetering on the edge of bankruptcy. AMD’s stock was near an all-time low. She had to make bold bets – some of which wouldn’t begin to pay off for five years – to turn AMD around. More importantly, perhaps, she had to take a call on what the company should not pursue.
AMD went big on building technology for high-performance computing applications. That set the company up to power crucial technology including cloud computing, data centers, AI, and gaming. Lisa was careful to avoid the “Internet of Things” which fell outside AMD’s core competency. These phrases might be commonplace in 2020, but back in 2014, most people had no idea what some of these terms meant.
Up until then, AMD was always under the shadow of larger competitor Intel. Not anymore. As Intel was having issues with its manufacturing processes, AMD raced ahead. The bets paid off, and AMD shares are up almost 38X since Lisa took office, earning her the moniker, “One of the most powerful women in tech.”
What Happened?: The high-flying stock is allowing AMD to build a well-rounded competitor to Intel. Yesterday, AMD announced a $35B all-stock deal to buy Xilinx, manufacturer of Field Programmable Gate Arrays. FPGAs can be reprogrammed after manufacturing and are applicable in 5G, edge computing, automotive, industrial, aerospace, and defense. This deal compares to a similar announcement last month by Nvidia regarding its purchase of chip IP vendor ARM for $40B.
Lisa Su will serve as CEO of the combined company, and Xilinx President and CEO will look after Xilinx business and strategic growth initiatives. To top the news, AMD delivered better-than-expected Q3 earnings with a 31% growth in its computing and graphics business. The chip-maker reported a net income of $390M with a profit of $120M and $2.8B in quarterly revenue, a 56% Y-o-Y increase.
The deal is expected to close by late 2021 after regulatory approvals including from the Chinese government. Given Lisa Su is a Taiwan-born American, and given the US-China geopolitical unease, one can only hope the deal doesn’t run into political rough weather.
Market Reaction: The news received a mixed reaction from Wall Street and analysts as AMD shares fell over 4%, and Xilinx shared gained more than 8%.AMD stock closed at $78.88, down 4.07%, whereas Xilinx closed at $124.35, up 8.56%; AMD’s stock is up 63% YTD. Compare that with Intel whose stock is down 22% YTD.
Company Snapshot ?
- AMD $78.88 -3.35 (-4.07%)
- XLNX $124.35 +9.80 (+8.56%)
- Exceeds Expecations: Microsoft earnings easily top expectations, but forecast for Xbox’s debut quarter dings stock (MSFT +1.51%)
- Alternative: Apple reportedly steps up effort to build Google search alternative (AAPL +1.55%)
- “Slaying” It: Sony raises full-year profit outlook after record second quarter on strong gaming, ‘Demon Slayer’ (SNE +1.67% )
Later Today ?
- 6.00 PM IST: Advance trade in goods deficit
- Before Market Open: General Electric Co Earnings (GE)
- Before Market Open: Boeing Co Earnings (BA)
- After Market Close: Visa Inc Earnings (V)
- After Market Close: eBay Inc Earnings (EBAY)
“Fun Fact of The Day” ?
- The English word with the most definitions is “set.”