Why Advanced Micro Devices Shares Popped

Is this meaningful or just another movement?

Evan Niu
Evan Niu, CFA
Apr 8, 2013 at 4:55PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Advanced Micro Devices (NASDAQ:AMD) popped today by as much as 13% on a Bloomberg report that Microsoft's (NASDAQ:MSFT) next Xbox gaming console will use AMD chips.

So what: Codenamed "Jaguar," AMD's chips are reportedly set to power the software giant's next-generation Xbox gaming console, which is expected to be unveiled next month. AMD chips are also powering Sony's upcoming PlayStation 4, displacing graphics rival NVIDIA.

Now what: The move will mark a transition to x86 architecture, replacing the Power PC architecture currently in use. Rumors of seeing AMD in the next Xbox aren't exactly new, but having a high-profile outlet like Bloomberg reporting it adds to the credibility. CEO Rory Read has been trying to diversify away from the stagnant PC market, and while the console gaming market offers less volume than PCs, it would still be an incremental gain for the chip maker.

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