It’s hard to discuss the supply chain crisis of 2021 without bringing up semiconductors. These tiny computer chips has become an increasingly sought after commodity. The electric vehicle (EV) race has taken off, and the rise of the metaverse has followed. As a result, companies across different sectors are scrambling to secure them. This has led to a highly profitable year and positive industry outlook for firms such as Nvidia (NASDAQ:NVDA) and Micron Technologies (NASDAQ:MU) who help produce these data storage devices.
One of their competitors, though, recently acquired a new competitive edge. Advanced Micro Devices (NASDAQ:AMD) confirmed today that it has acquired Xilinx (NASDAQ:XLNX), a leading chip producer. While XLNX stock is no longer trading, news of the AMD-Xilinx merger has sent AMD shares rising all morning. As of this writing, they are up 4% for the day and don’t seem to be slowing down. While it’s been a difficult month for AMD stock so far, this development could easily be the catalyst the company needs to pull back into the race alongside its larger peers. Last month, news of this impending deal sent XLNX stock shooting up.
According to the statement released by the company, the merger creates “the industry’s high-performance and adaptive computing leader.” If that’s true, the future will certainly be bright for AMD stock. What else can investors expect following this merger? Let’s take a closer look.
What the AMD-Xilinx Merger Means for XLNX Stock
- Valued at $50 billion, this is a record deal for the computer chip industry. It was originally set at $35 billion, but AMD stock’s growth since the deal’s announcement has driven up the price.
- According to Dr. Lisa Su, president and CEO of AMD, the merger will allow her company to “capture a larger share of the approximately $135 billion market opportunity” that it sees in the areas of cloud, edge and intelligent devices.
- Xilinx brings quite a bit to the table for AMD. Its holdings include expertise in industry-leading field-programmable gate array (FPGAs), adaptive systems on a chip (SoCs) and artificial intelligence (AI) engines.
- Reuters reports that this merger will equip AMD with 15,000 engineers. Additionally, it will mean a completely outsourced manufacturing strategy for the company, which will be reliant on Taiwan Semiconductor Manufacturing (TSMC).
- AMD’s success comes on the heels of a failure from one of its rivals. Until recently, Nvidia had been working to secure the acquisition of Arm, a subsidiary of SoftBank Group (OTCMKTS:SFTBY). Last week the company announced that the deal would not be moving forward, though, citing regulatory concerns.
- While Su will retain her position as CEO of the newly merged company, Xilinx CEO Victor Peng will serve as president of the Adaptive and Embedded Computing Group, a newly formed entity.
- It is expected that the cost savings generated by the AMD-Xilinx Merger will be roughly $300 million. This could position AMD well for the rise that experts such as InvestorPlace contributor Mark Hake were already predicting before the merger was confirmed.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.