Chip giant AMD reportedly wants to buy Xilinx, an important manufacturer of AI processors, for $30 billion, in a sign of growing ambitions: 'Has the minnow grown up into a shark?'

  • AMD is reportedly in talks to acquire Xilinx for about $30 billion, according to the Wall Street Journal. The report sent Xilinx shares rallying 13% in Friday trades, while AMD's stock slipped about 4%.
  • Xilinx is renowned as the first company to manufacture FPGAs — a circuit design that's been around for a while, but has come into prominence as one of the better ways to build hardware that's specifically suited for artificial intelligence.
  • The reported deal highlights AMD's growing ambitions in a fast-changing semiconductor market, where it faces bigger rivals, led by Intel and Nvidia, analysts say.
  • "Has the minnow grown up into a shark?" Bernstein analyst Stacy Rasgon wrote in a note to clients. "Suffice it to say, we were surprised by the report…That being said, some preliminary consideration might suggest the fit could make sense."
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AMD has long played David to Intel's Goliath in semiconductors in one of the most bitter rivalries in tech.

Now, AMD's reported bid to buy Xilinx for more than $30 billion suggests that the Silicon Valley company is aiming to become a bigger, more dominant player in a fast-changing industry. The reported deal price would represent roughly a 20% premium on the company's valuation.  

AMD is said to be in advanced talks to acquire chipmaker Xilinx, according to the Wall Street Journal.  AMD could not immediately be reached for comment. A Xilinx spokesperson said the company "does not comment on rumors and speculation."

AMD shares shed about 4% on Friday, while Xilinx rallied about 13%.

The reported acquisition would expand AMD's reach in data centers and communications where Xilinx is an established player. It would also point to a more aggressive AMD strategy in an evolving market where it faces longtime rivals, led by Intel and Nvidia.

"Has the minnow grown up into a shark?" Bernstein analyst Stacy Rasgon wrote in a note to clients. "Suffice it to say, we were surprised by the report… That being said, some preliminary consideration might suggest the fit could make sense."

Buying Xilinx would give AMD access to technology that would allow it to make more powerful data center processors, the market where it has long been a fierce, but consistently smaller competitor to Intel.  That rivalry has swung in AMD's favor recently amid Intel's serious production missteps.

Xilinx is also a pioneer in field-programmable gate array (FPGA) — programmable chips or processors that can be reprogrammed to suit the needs of the technology for which it is being used.

Xilinx is credited as the first company to sell FPGAs at scale starting from its founding in the 1980's, but the company's star has risen in recent years. FPGAs, it turns out, are particularly well-suited to handling the immense amounts of data required by artificial intelligence. A major Xilinx rival, Altera, was acquired by Intel in 2015.

The reported merger also "could act as a competitive foil to Nvidia should the Arm deal go through," Rasgon wrote.

Nvidia has signed a $40 billion deal to buy Arm, the chip design company which has emerged as a powerhouse in the semiconductor market.  The deal, which is expected to face stiff regulatory scrutiny, could turn Nvidia into an even more formidable competitor in the data center market. Nvidia has taken the lead in chips used for AI technologies which are fast expanding in data centers.

"If Nvidia closes Arm and increasingly owns the market for server (chips), AMD may need more of a foil for their own further differentiation," Rasgon told Business Insider. "It'll be very interesting to hear the case that AMD puts forth, if they actually do so ,of course."

In fact, other analysts were skeptical that buying Xilinx would be a clear game changer for AMD

"While there would likely be some longer-term operational and sales synergies, we would be surprised if the transaction results in immediate substantial accretion and we don't see Xilinx filling an obvious technology gap for AMD," Wedbush analyst Matt Bryson told clients in a note.

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