Investing in Advanced Micro Devices Stock (AMD)

Market Trading EssentialsApril 18, 2022

5 minutes read

Advanced Micro Devices Inc. (AMD) is a major semiconductor company with customers worldwide. The company designs and develops microprocessors (CPUs), graphics processing units (GPUs), server and embedded processors, semi-custom system-on-chip (SoC) products, and technology for game consoles. It also offers development services and sometimes sells or licenses portions of its intellectual property (IP) portfolio. AMD’s products are focused on providing high-performance computing capability for 5G and communications infrastructure, AI and analytics, gaming, cloud computing, and more.

AMD was founded by eight individuals, including Jeremiah Sanders, in 1969 as a Silicon Valley startup focused on developing semiconductor products. It released its first product in 1970 and went public two years later through an initial public offering (IPO) on Sept. 27, 1972. Throughout the mid-1970s, the company began producing computer chips and was a second-source chip manufacturer. But in 2008, AMD embarked on a new path. The company announced that it was splitting into two companies. One of those companies retained the name AMD and focused on designing microprocessors. The other was spun off from AMD and became GlobalFoundries Inc. (GFS), which focused on the costly business of chip manufacturing.

Today, AMD develops high-performance semiconductor products, which are then made into chips by contract manufacturers, for the data center, personal computer (PC), and gaming markets. Its headquarters are in Santa Clara, California and its chief executive officer (CEO) and chairperson is Dr. Lisa Su. The company is classified as a member of the technology sector. It operates within the semiconductor industry and its main rivals include Intel Corp. (INTC) and NVIDIA Corp. (NVDA). AMD generated net income of $3.2 billion on $16.4 billion of net revenue in its 2021 fiscal year (FY), which ended Dec. 25, 2021.

Key Takeaways

AMD designs and develops high-performance semiconductor products for the data center, PC, and gaming markets.
The company’s main rivals include Intel Corp. (INTC) and NVIDIA Corp. (NVDA).
AMD earned $3.2 billion in net income on $16.4 billion of net revenue in FY 2021, which ended Dec. 25, 2021.
AMD has agreed to acquire Pensando Systems for approximately $1.9 billion.

Recent Developments

On April 4, 2022, AMD announced that it has agreed to acquire Pensando Systems, which operates a distributed services platform offering cloud infrastructure services, for approximately $1.9 billion. The acquisition is aimed at boosting AMD’s high-performance technology portfolio that already includes CPUs, GPUs, field programmable gate array (FPGA), and SoC solutions. The acquisition is expected to close in the second quarter of 2022.
On Feb. 24, 2022, AMD announced that its board of directors has approved a new $8 billion share repurchase program, which augments the $4 billion share buyback program announced in May 2021. The company has repurchased about $3 billion worth of its common stock since the original program began. The new program has no termination date and does not require AMD to purchase any of its common stock.
On Feb. 14, 2022, AMD announced that it completed its acquisition of Xilinx, a semiconductor company and inventor of the FPGA and Adaptive SoCs, in a deal valued at approximately $50 billion. FPGAs are capable of being reprogrammed for specific functionality after being manufactured, unlike Application Specific Integrated Circuits (ASICS), which are custom manufactured to perform specific tasks. The acquisition agreement was first announced in late October 2020 and was originally valued at $35 billion, but AMD’s rising stock value pushed up the final deal price.

What’s happening with AMD regarding the chip shortage?

The COVID-19 pandemic has disrupted supply chains and led to soaring demand for electronic goods as millions of people worldwide sheltered at home. The surge in demand disrupted and placed unusual strain on the global semiconductor industry, contributing to a global chip shortage. The shortage has made it difficult to purchase a broad range of products that are manufactured with chips embedded in them, such as video game consoles and automobiles. But demand is just one side of the story.

Supply has also been strained for various reasons. A fire at a factory owned by Japan-based Renesas Electronics Corp., a leading global auto-chip maker, exacerbated the chip shortage. The ongoing U.S.-China trade war has aggravated the problem. These disruptions have highlighted a key weakness in the chip manufacturing process. It can take 2-3 months to make a single chip and up to six months from the start of the manufacturing process to the time when the chip is actually embedded in an electronic device. Building a new manufacturing facility can cost anywhere from $7 billion to $15 billion and take years to build.

AMD, which no longer manufactures its own chips and relies on foundry companies to build them, has been navigating the chip shortage well so far. It has even been able to take some of the market share away from Intel in both the PC and server markets. In November 2021, one of the company’s top executives said that the company has avoided most of the problems related to the shortage through forecasting the demand outlook years in advance. AMD is also focused on more advanced chips that have been less affected by the shortage compared to mass-produced older types of chips.

CEO Su said in February, following the acquisition of Xilinx, that she sees global chip supplies remaining tight for the first half of 2022, but then easing by the second half of the year. Su added that AMD is focusing on working more closely with its customers and is planning with them over multi-quarter and multi-year time horizons. This helps to improve the efficiency of those supply chains. Aided by the Xilinx acquisition, AMD’s position as a large player in the industry helps to ensure that the company gets its fair share of capacity and support within the industry.

Who Is AMD’s CEO?

AMD’s CEO is Dr. Lisa Su, who also serves as the company’s chairperson. Before serving as CEO, Su was chief operating officer (COO). She joined AMD in 2012 as senior vice president and general manager of the global business units.

Has AMD Ever Split Its Stock?

Yes. AMD has split its stock six times:

(Record dates below)

Aug. 7, 2000: 2-for-1 stock split
July 22, 1983: 2-for-1 stock split
Sept. 27, 1982: 3-for-2 stock split
Sept. 22, 1980: 2-for-1 stock split
Sept. 24, 1979: 3-for-2 stock split
Sept. 27, 1978: 3-for-2 stock split

Who Owns The Most AMD Shares?

The Vanguard Group Inc. owns the most shares of AMD. As of April 15, 2022, it owns approximately 137.2 million, or 8.4%, of the company’s total shares outstanding. The total value of Vanguard’s holding of AMD shares is approximately $15 billion.