AMD to buy rival Xilinx in $35 billion chipmaker mega-deal

Advanced Micro Devices (Nasdaq: AMD) agreed to buy rival U.S. chipmaker Xilinx (Nasdaq: XLNX) for $35 billion in stock.

Why it matters: AMD is expanding at the same time that rival Intel is divesting, using the nearly $40 billion in market cap it's gained so far in 2020. The deal also reflects rapid growth of the data center market, due to increased demand from cloud computing giants like Amazon, Google, and Microsoft.

Details: AMD is paying the equivalent of $143 per share, representing nearly a 25% premium to yesterday’s closing price for Xilinx stock.

• The deal requires regulatory approval, including in China, with AMD estimating that it may not close until early 2022.
• AMD would be required to pay Xilinx $1.5 billion if it terminates the transaction, while Xilinx would pay $1 billion were it to terminate.

The bottom line: "The deal will give [AMD CEO Lisa] Su more of the pieces she needs to break Intel’s stranglehold on the profitable market for data center computer components. Xilinx... makes field programmable gate arrays, or FPGAs. That kind of chip is unique because its function can be altered by software, even after it’s been installed in a piece of machinery." — Ian King, Bloomberg