Advanced Micro Devices (AMD) is currently in late-stage discussions to buy rival chip maker Xilinx Inc, writes The Wall Street Journal, citing people familiar with the matter.
According to the publisher, the deal could be worth over $30 billion, and an agreement could be reached as soon as next week. However, The Wall Street Journal adds that nothing is final, and the deal could ultimately fall through especially as talks initially stalled before restarting.
If AMD does snap up Xilinx (XLNX), it would be the latest billion-dollar semiconductor merger in a consolidating industry. Most notably, Nvidia recently revealed plans to buy Arm Holdings for a whopping $40 billion- which, if it goes ahead, would be the world’s largest semiconductor acquisition.
While AMD has exploded 89% year-to-date, shares in XLNX are up a more modest 8%. The stock scores a cautiously optimistic Moderate Buy Street consensus. That’s with 7 recent buy ratings vs 5 hold ratings. Meanwhile the average analyst price target for Xilinx indicates upside potential of 10%.
Speaking for the bulls Baird analyst Tristan Gerra recently boosted his XLNX price target from $115 to $120 while reiterating a buy rating.
He cited encouraging industry checks highlighting a pick-up in 5G base station-related orders, building momentum and a ramp in capacity-related orders.
The analyst stated: “We continue to see strong design win activity for Versal RF, at several customers and including Samsung’s second-generation 5G radio networks, with a ramp slated for C2021. MIMO and mmWave radio implementations both offer a very good fit for FPGAs.”
However Mizuho Securities analyst Vijay Rakesh is sticking to the sidelines for now (with a $110 price target). “We maintain our Neutral as XLNX faces near-term challenges from broadcast delays, a Huawei restriction adding to topline headwinds post Sept 14” Rakesh explained.
But the analyst does point out that, longer-term, XLNX could benefit from 5G ramps, Telco Open-RAN development (O-RAN) and a 2021 Olympics and broadcast sports rebound. (See XLNX stock analysis on TipRanks).
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