Back to top

Image: Bigstock

AMD Acquires Nitero, Strengthens Virtual Reality Portfolio

Read MoreHide Full Article

Advanced Micro Devices Inc. (AMD - Free Report) recently announced the acquisition of intellectual property (IP) and engineering staff of Austin-based virtual reality (VR) start-up, Nitero. According to Forbes, the start-up’s co-founder and Chief Executive Officer (CEO) Pat Kelly has joined AMD as corporate vice president, Wireless IP.

Nitero develops a wireless chip that enables transmission of data from desktop PCs to VR headsets. Consequently, the technology eliminates the need of bulky wires (Tethering), which has been a deterrent for faster adoption of VR headsets.

The acquisition not only expands AMD’s VR-related product portfolio but also boosts competitive prowess in the wireless 60 GHz technology market, where Intel (INTC - Free Report) and Qualcomm (QCOM - Free Report) are its nearest competitors, per Forbes.

Share Price Falls

However, the acquisition didn’t strike the right chord with the investors as the share price fell 3.1% to close at $13.10 on Apr 10.

AMD shares have been on a topsy-turvy ride in the last one month. The stock plunged almost 7% on Apr 6 following a bearish report by a Goldman Sachs analyst. Per MarketWatch, which quoted the analyst, intensifying competition from the likes of Intel and NVIDIA (NVDA - Free Report) are a major headwind for the company.

Notably, AMD shares have declined 8.1% in the last one month as compared with the Zacks Electronics-Semiconductors industry’s fall of 2.8%.



Nitero: A Game Changer for AMD in VR space?

VR has been touted as the next “happening” computing platform with massive growth potential. Per IDC’s Worldwide Semiannual Augmented and Virtual Reality Spending Guide, worldwide revenues will increase 130.5% over 2016 to $13.9 billion in 2017. Further, worldwide revenues will grow at a compound annual growth rate (CAGR) of 198% (over the 2015–2020 period) reaching more than $143.3 billion by 2020.

AMD has been gearing up to solidify footprint in the VR and augmented reality (AR) market with Radeon and Ryzen chips. We believe that the addition of Nitero’s technology boosts AMD’s competitive prowess in the untethered VR market.
 

Moreover, the technology has attracted a number of head mounted display (HMD) makers. Per TechCrunch, HTC Vive developer Valve has “significant investment” in Nitero. The acquisition will now allow AMD to license Nitero IPs and charge fees from these headset developers, eventually driving top-line growth.

Currently, AMD carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>

Published in