August 13, 2020 Can/Should AMD Buy Xilinx??

In the news lately is the talk of Nvidia negotiating to buy ARM. On Twitter there has been lots of reactions to this deal, mostly negative concerning the other ARM customers once Nvidia takes over.

TheVerge covered this topic, here. Clearly SoftBank is motivated to sell, but it remains to be seen how regulators will react.

Meanwhile Benzinga put out an article, quoting Cascend Chief Investment Strategist Eric Ross, saying Nvidia should buy Xilinx.

{A Xilinx acquisition would help Nvidia diversify into areas — such as defense,  aerospace, communications and industrial — where it doesn’t have much exposure as of now, he said.

This would provide the company with a long tail of customers, he said. 

“And bringing XLNX’s architecture onto the CUDA development platform could dramatically enhance XLNX’s attractiveness to developers.”

Valuation Makes Sense: With a 25% premium from Xilinx’s valuation, it would cost Nvidia $32.25 billion to buy Xilinx, Ross said.

Buying Xilinx at a 25% premium would be immediately slightly accretive from a valuation standpoint, the analyst said.

Even after a Xilinx purchase, Nvidia will have enough cash to buy Arm, he said. 

Nvidia’s valuation will become even more compelling if it pursues a 3-to-1 stock split along with a Xilinx buy, Ross said.}

Given Nvidia’s current market cap of $280B, this is likely quite doable.

This Nextplatform article from January 2020 talked about M&A in the HPC space, which specifically described how AMD should acquire Xilinx, just like Intel had acquired Altera.

{One company that can play into all of these markets is FPGA-maker Xilinx. Since Intel acquired Altera in 2015, Xilinx is the only standalone company of any size that makes reconfigurable logic devices. Give that, the natural buyer for Xilinx would be AMD, Intel’s arch-nemesis. AMD, of course, already has a highly competitive lineup of CPUs and GPUs to challenge its much larger rival, and the addition of an FPGA portfolio would open a third front.  It would also provide AMD entry into a whole array of new application markets where FPGAs operate: ASIC prototyping, IoT, embedded aerospace/automotive, 5G communications, AI inference, database acceleration, and computational storage, to name a few.

The only problem is that Xilinx’s current market cap of around $25 billion, or about half the current market cap of AMD. And if you’re wondering about AMD’s piggy bank, the chipmaker has $1.2 billion cash on hand as of September 2019. Which means any deal would probably take the form of a merger rather than a straight acquisition.}

It is crucial to point out that while Xilinx has remained a $25B company, AMD had soared to be a near $100B company. AMD can issue new shares to buy Xilinx. While this will dilute the current shareholders, AMD will also benefit from Xilinx’s revenue and earnings. Xilinx has revenue of $727M and non-GAAP income of $160M in the latest quarter. Certainly, AMD will gain from tremendous synergy once Xilinx is folded into the new company. AMD has been working on heterogeneous computing. One can only imagine what they can do by adding FPGA to their design.

If there is a bidding war between Nvidia and AMD to acquire Xilinx, then the acquisition cost will necessarily go up. It will be interesting to see how this plays out.

Even without buying Xilinx, AMD continues to gain in the ever important data center market.

TheFly reported that DA Davidson finds evidence of ‘rapid buildout’ of AMD chip at AWS, here.

{DA Davidson analyst Ben Wilson said he now finds that regional data center availability for AMD’s (AMD) latest-gen Zen 2 processor has doubled on Amazon Web Services (AMZN) to 14 regions from 7 regions in his previous count. Noting that AWS announced initial availability of AMD’s Rome processor only two months ago, Wilson said he views this “rapid buildout” of the latest-gen AMD chip as significant and a material tailwind for AMD’s data center business.}

This is also announced by AWS, here.

{Amazon EC2 instances featuring AMD EPYC processors are now available in additional regions

Posted On: Aug 11, 2020

Starting today, Amazon EC2 C5a instances have expanded availability to include AWS Europe (Stockholm), Asia Pacific (Hong Kong), Asia Pacific (Tokyo), Asia Pacific (Seoul), Europe (London), US West (N. California) and Canada (Central) Regions. In addition, 8xlarge and 16xlarge sizes of Amazon EC2 M5ad and R5ad instances are now available in the US East (N. Virginia) Region}

Milan can’t come soon enough!