When AMD (NASDAQ:AMD) stock broke out to the upside after the earnings call, the pattern change is welcome by shareholders. AMD spent too much time stuck in the $80 - $85 zone. Even after the higher price, AMD has more upside ahead.
On Aug. 3, AMD launched a high-end Radeon GPU (graphics chip) for Apple’s Mac Pro. This GPU will display the 7nm RDNA 2 architecture.
In Q2, AMD’s sales almost doubled Y/Y to $3.85 billion. The gross margin of 48% rose thanks to a favorable mix of high-end Ryzen chips, Radeon, and EPYC chip sales.
AMD’s pending deal to acquire Xilinx (NASDAQ:XLNX) is discounting XLNX stock. Markets are pricing in China to reject the deal. The best-case scenario is that China delays its decision. As a comparison, Nvidia (NASDAQ:NVDA) took 13 months for the Mellanox acquisition to get approved by SAMR (State Administration for Market Supervision).
Investors who want AMD at a discount may buy XLNX stock instead. Xilinx shareholders get 1.7234 shares of AMD for every stock. However, arbitrage traders have to unwind their AMD short position and buy XLNX. Given the little overlap between the two firms, China will have to approve the deal.
If AMD does not get approval, it will have to pay a hefty $1 billion fee to Xilinx.
