AMD grabs Xilinx for $35 billion as chip industry consolidation continues

The chip industry consolidation dance continued this morning as AMD has entered into an agreement to buy Xilinx for $35 billion, giving the company access to customers requiring chips with high performance workloads like artificial intelligence.

AMD sees this deal as combining two companies that complement each other’s strengths without cannibalizing its own markets. CEO Lisa Su believes the acquisition will help make her company the high performance chip leader.

“By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent and scale to define the future of high performance computing,” Su said in a statement.

In an article earlier this year, TechCrunch’s Darrell Etherington described Xilinx new satellite focused chips as offering a couple of industry firsts:

It’s the first 20nm process that’s rated for use in space, offering power and efficiency benefits, and it’s the first to offer specific support for high performance machine learning through neural network-based inference acceleration.

What’s more, the chips are designed to handle radiation and the rigors of launch, using a thick ceramic packaging. These kinds of applications should open up new markets for AMD as the two companies combine.

Xilinx launches a new reconfigurable space-grade chip optimized for local machine learning on orbit

In a nod to shareholders of both companies, she said that this deal should benefit both. “This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company.

So far stockholders aren’t impressed with AMD stock down over 4% in pre-trading, while Xilinx stock is up over 11% in pre-trading. It’s worth noting that Xilinx has a market cap of over $28 billion compared with AMD’s 96.5 billion, meaning AMD will be buying a company with significantly more value.

This deal comes on the heels of last month’s ARM acquisition by Nvidia for $40 billion. With two deals in less than two months totaling $75 million, the industry is looking at the bigger is better theory. Meanwhile Intel took a hit earlier this month after its earnings report showed weakness in its data center business.

Here’s why Intel’s stock just dropped 10% after reporting earnings

While the deal has been approved by both company’s boards of directors, it still has to pass muster with shareholders and regulators, and is not expected to close until the end of next year.

When that happens Su will be chairman of the combined company, while Xilinx CEO President and CEO, Victor Peng, will join AMD as president, where he will be in charge of the Xilinx business and strategic growth initiatives.