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Why Xilinx Stock Surged Today

By Joe Tenebruso – Oct 9, 2020 at 5:28PM

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The chipmaker could soon be acquired by a larger rival.

What happened 

Shares of Xilinx (XLNX) jumped 14% on Friday, following reports that the semiconductor company was in takeover talks. 

So what 

Advanced Micro Devices (AMD -3.23%) is in advanced negotiations to acquire Xilinx for as much as $30 billion, according to The Wall Street Journal. The companies could reach an agreement as early as next week, though the Journal cautions that talks could fall through.

A person is pointing to an upwardly sloping line that's above a flat line.

AMD could make a bid for Xilinx. Image source: Getty Images.

AMD's interest in Xilinx could have been heightened by NVIDIA's (NVDA -1.51%) move to acquire UK-based chip designer Arm Limited for $40 billion. The semiconductor industry is rapidly consolidating, and AMD wants to keep pace with NVIDIA and its other competitors.

Now what 

Xilinx produces adaptive processing chips that can be programmed in the field. They can be used in a wide array of growth markets, including 5G network infrastructure, cloud computing, and artificial intelligence. Should a deal be reached, adding Xilinx under its umbrella would give AMD a stronger presence in these areas and broaden its total addressable market.

Investors, though, appear to be concerned with the price AMD is paying or the risks integrating a business the size of Xilinx would entail, or perhaps both. AMD's shares fell 4% on Friday.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool recommends Xilinx. The Motley Fool has a disclosure policy.

Stocks Mentioned

Xilinx Stock Quote
Xilinx
XLNX
Nvidia Stock Quote
Nvidia
NVDA
$168.76 (-1.51%) $-2.59
Advanced Micro Devices Stock Quote
Advanced Micro Devices
AMD
$74.98 (-3.23%) $-2.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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