Back to top

Image: Bigstock

Zacks Investment Ideas feature highlights: Advanced Micro Devices, Xilinx, Analog Devices, Maxim Integrated Products and Taiwan Semiconductor Manufacturing Company

Read MoreHide Full Article

For Immediate Release

Chicago, IL – October 28, 2020 – Today, Zacks Investment Ideas feature highlights Features:Advanced Micro Devices, Inc. (AMD - Free Report) , Xilinx, Inc. (XLNX - Free Report) , Analog Devices, Inc. (ADI - Free Report) , Maxim Integrated Products, Inc. (MXIM - Free Report) and Taiwan Semiconductor Manufacturing Company Limited (TSM - Free Report) .

What to Make of AMD's Acquisition of Xilinx?

Advanced Micro Devices officially announced its plan to buy competing chip maker Xilinx following its Q3 earnings release this morning. The deal was released as an all-stock $35 billion acquisition, which would add to the tidal wave of semiconductor consolidation that we have seen in this unprecedented year.

Tech remains steaming hot in the face of a highly controversial election and a resurging pandemic that could drive the global economy back into a tailspin. The world needs the latest technology to fully function in the self-isolating society that COVID-19 has caused. With chips at the heart of almost everything we use, it's no question why well-positioned stocks in this segment have been taking off.

2020 has already seen some of the most significant mergers in chip history with Analog Devices' $20.9 billion all-stock acquisition of Maxim Integrated, which was greenlit by investors early this month, among others.

The AMD + XLNX Deal

AMD claims that this acquisition would immediately improve the combined business margins, cash flows, and EPS. The combined enterprise would be worth $135 billion. AMD doesn't expect that this deal to close until the end of 2021.

According to AMD's press release this morning, "the combination will create the industry's leading high performance computing company, significantly expanding the breadth of AMD's product portfolio and customer set across diverse growth markets where Xilinx is an established leader."

"Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry's high performance computing leader and partner of choice for the largest and most important technology companies in the world," AMD President and CEO Dr. Lisa Su said.

AMD has been gradually taking CPU market share. Its partnership with the cutting-edge Taiwan Semiconductor Manufacturer Co, which has thrusted this company's market share & stock price to continuously new highs, has helped push companies like Intel further into obsolescence.

AMD and Xilinx will be working together to further penetrate the massive data center market, which has been exploding with cloud-computing, the 5G revolution, and the rise of artificial intelligence (AI). Xilinx's high-performance programmable chips and key relationships will help the combined business further penetrate the proliferating data center market.

Management expects to see $300 million in cost synergies within the first 18 months of close.

Should You Buy In?

Today AMD is down over 4% on the acquisition news and profit pulling from investors who saw what they wanted in its September quarter earnings this morning. This is a natural investor reaction for an acquiring company that has surged over 65% this year and is paying a lofty 25% premium for this seemingly expensive acquisition.

XLNX is up 8.5% today but has fallen since open with shares of AMD. I expect these shares to track together until the deal is finalized in what is estimated to be late 2021. I would be hesitant to buy into either of these stocks at their currently rich valuations.

AMD released its quarterly earnings today, and it illustrated a big beat on both top and bottom-lines. It wasn't enough to keep investors enthusiastic at this current valuation level. The XLNX acquisition adds to the uncertain future of this innovative chip maker.

Final Thoughts 

Expect to see more consolidation in the chip space as the necessity for scale, portfolio diversity, and groundbreaking innovations become evident in this increasingly competitive space. Next week's highly controversial election and the recent resurgence in the global pandemic are sure to throw a wrench in market action.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>

Follow us on Twitter:

Join us on Facebook:

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.