Advanced Micro Devices to Acquire Rival Xilinx for Over $30 Billion; Target price $120 in Best Case

American chipmaker Advanced Micro Devices (AMD) is in advanced talks to acquire its rival semiconductor manufacturing company Xilinx in a deal that could be worth over $30 billion, the Wall Street Journal reported, citing people familiar with the matter.

According to the WSJ, both the chipmakers are discussing a deal that could come together as early as next week. However, there is no assurance that they will for sure ink the deal.

AMD’s shares fell 2.5% to $84.33 in pre-market trading on Friday; however, the stock is up about 90% so far this year.

Advanced Micro Devices (AMD) stock forecast

Twenty-five analysts forecast the average price in 12 months at $83.78 with a high forecast of $120.00 and a low forecast of $62.00. The average price target represents a -3.16% decrease from the last price of $86.51 From those 25, 12 analysts rated “Buy”, 12 rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $73 with a high of $95 under a bull scenario and $39 under the worst-case scenario. Jefferies boosted their stock price forecast on Advanced Micro Devices to $100 from $95. Deutsche Bank boosted their target price on Advanced Micro Devices to $70 from $50 and gave the company a “hold” rating in July.

Other equity analysts also recently updated their stock outlook. In July, Barclays boosted their target price on Advanced Micro Devices from $50 to $55 and gave the company an “equal weight” rating. At last, Royal Bank of Canada boosted their target price to $84 from $71.

Analyst view

“Advanced Micro Devices (AMD) continues to execute on its product roadmap while Intel experiences process technology delays on 10nm server and supply shortages at the low end of the PC market,” said Joseph Moore, equity analysts at Morgan Stanley.

Zen drives further share gains for AMD, as we estimate the company gaining share in desktop, notebook and server processors in 2020 and 2021. We model Computing and Graphics revenue of $5.9bn (up 25.9% y/y) and Enterprise, Embedded and Semi-Custom revenue of $3bn (up 46.5% y/y).”

Upside and Downside Risks

Upside: 1) PC and Zen server share gain accelerates as Zen adoption picks up; Intel’s competitive response at 10nm is less impressive than expected. 2) Console cycle turns out to be stronger than expected – highlighted by Morgan Stanley.

Downside: 1) Intel’s server CPUs for 2020 (Cooper Lake in 1H on 14nm and Ice Lake in 2H on 10nm) stifle AMD’s momentum and allow it to regain share. 2) AMD loses graphics share to NVIDIA. 3) Console cycle underperforms expectations.

Blame it on The Nasdaq

US data announced this week showed a significant recovery in building permits and housing, building permits (MoM) for July surged to 18.8% compared to the previous 3.5%, Housing Starts data revealed 22.6% which is 5.1% higher than the previous month, existing-home sales data were as well positive reported beyond expectations.

Despite the negative Jobless claims and Philadelphia Fed Manufacturing PMI reported on August 20, Manufacturing PMI and Services PMI demonstrated a significant improvement, which led major US Indices to surge whereas S&P500 and Nasdaq100 reached the all-time high.

US stocks continue hitting records, Tesla surged by 24.19% breaking the significant $2000 per share value, and is now worth more than $382 billion surpassing Walmart by nearly $10B. Nasdaq’s top company by market cap – Apple gained 8.23% hitting the $2127B in capitalization. Tesla and Apple remain the top popular shares last week based on Robinhood data.

S&P500 closed above the all-time high, some might think that there is a possible double top pattern, economic recovery of the US indicates that the index may continue the run towards $3500.

Nasdaq owes its gains not only to Tesla and Apple, but there are also other tech companies that surged last week and during the pandemic, such as NVIDIA, AMD, Qualcomm, Microchip Tech, Texas Instruments.

An hourly chart demonstrates that the correction is most likely will happen as the price touched the dynamic resistance and the fifth wave of an ending diagonal is about to complete at 11600. Ending diagonal is a trend reversal pattern, which usually demonstrates exhaustion of bulls, note the evening star doji, though the closing is above the previous close, it still shows uncertainty and exhaustion.

NDX chart by TradingView

How is it related to cryptocurrencies and Bitcoin?

Bitcoin and Ethereum price actions are considered as cryptocurrency market movers. Since Bitcoin is nowadays considered as the digital Gold and Ethereum as a digital Silver, their price action now is correlated to US data which effect Gold. Gold was ever since used as a safe-haven to hedge funds during the uncertain times and inflation, so is Bitcoin now.

An hourly chart of Bitcoin indicates that the price could decline further to towards $11200 – $11160 to complete the Head and Shoulders pattern, another pattern to watch is an ending diagonal which is yet to be completed as well. Bitcoin remains below the major resistance level of $11700 an in order to show another bull run it must break the dynamic resistance (ending diagonals upper edge) and close above the 11700, however testing 11200 might bring another stimulus for bulls.

BTCUSD price on Overbit

Ethereum plummeted to $380 after reaching the year’s maximum at $446.67, loosing 9.7% this week only. Digital Silver price is following a similar ending diagonal pattern, and if the upper dynamic resistance and a static resistance of 397 is not overpassed, ETH might continue the drop towards a major support at $380, and if that support is broken, towards $370 – 369.

ETHUSD price on Overbit

Unlike Bitcoin, Gold lost only 0.20% in price for the week. A significant drop was on Wednesday August 19 ahead of US data announcements, where the precious metal lost 3.67% after gaining 2.97% on Monday and Tuesday.

Head and shoulders pattern is identified on an hourly chart of Gold and the price might continue the drop down to $1881.60 – 1880, where if the support laid on those level withheld the price might retrace towards 2014 and if above towards 2046, where the bearish pattern will be completed.

Gold price on Overbit

Since Gold and Silver prices demonstrate similarities in their price action, the same Head and Shoulders is visible on an hourly chart of XAGUSD. The price is below the dynamic support of August 12 which might signal to a further decline down to $25.30.

Silver price on Overbit

The price continues the short-term downtrend move inside a descending channel, which in other had forms another controversial to the H&S pattern of Bullish Flag.

Silver price on Overbit

If bulls are able to push the price above the dynamic support and if the dynamic resistance is overtaken at $27, the bullish run might proceed towards $28 – 28.50.

Key takeaways for the upcoming week would be announcements from Eurozone, Great Britain, China and the US.

Important announcements to watch:

Tuesday, August 25, 2020

German GDP (YoY) as per Second quarter data is expected to be -11.7%, 9.8% lower than the previous -1.9%

German GDP (QoQ) as per Second quarter data is expected to be -10.1%, 7.9% lower than the previous -2.2

US CB Consumer Confidence (August) is expected to be 93, 0.4 points higher than the previous 92.6

US New Home Sales (July) is expected to be 786K, 10K higher than the previous 776K

Wednesday, August 26, 2020

US Core Durable Orders is expected to be 2.1%, 1.5% lower than the previous 3.6%

Thursday, August 27, 2020

US GDP (QoQ) as per 2nd Quarter is expected to be -32.6%, 0.3% higher than the previous -32.9%

US Initial Jobless Claims is expected to be 1,000K, 106K lower than the previous 1,106K

US Pending Home Sales (MoM) as per July is expected to be 4.5%, 12.1% points higher than the previous 16.6%

Asides from the data to be announced, there are other important events to trace.

Republican National Convention, which will be held on Monday, in which delegates will determine the nominees for the upcoming presidential elections. Markets will be watching this event closely as during the current campaign Democrats are having an edge over republicans.

Source: Yahoo Finance

Another major event would be an annual Jackson Hole conference this Thursday, August 27, where FED Chairman Jerome Powell will speak about current economic situation, inflation targets and possibly share preliminary focus on interest rate change.

The economic state and inflation in the US once again are an important constituent of the Global economy and global markets, all these events will be decisive for the mid-term price movements for the US Indices, commodities and cryptocurrencies.

Advanced Micro Devices Near All-Time High After Historic Breakout

Advanced Micro Devices Inc. (AMD) soared after beating Q2 2020 profit and revenue estimates in July, underpinned by a remarkable 45% year-over-year increase in Computing and Graphics division sales. The smaller Embedded and Semi-Custom division grew 62% during the quarter while Enterprise income fell 4%. The chip manufacturer ended the bullish call by raising Q3 revenue guidance by a wide margin, now expecting to book between $2.45 and $2.65 billion.

Advanced Micro Devices Taking Market Share From Rivals

The company is taking advantage of systemic delays at larger rival Intel Corp. (INTC), expanding a loyal customer base by getting highly-competitive next-generation processors to market at a faster pace. Both central processing unit (CPU) and graphics processing unit (GPU) sales are posting impressive growth, with formerly-loyal NVIDIA Corp. (NVDA) users making the switch. The graphics segment has been growing exponentially since the first quarter.

Cowen analyst Matthew Ramsay raised their AMD target from 90 to 100 last week, noting “We had the opportunity to host AMD CEO Dr. Lisa Su for a series of virtual investor meetings/calls. Messages of road map consistency, execution dependability and much closer collaboration with key customers shone through. With Intel’s road map in flux, but in larger measure due to AMD’s own product innovation, we forecast share gains and strong revenue/margin growth.”

Wall Street And Technical Outlook

Wall Street consensus has eased off extremely bullish levels, with extraordinary share gains lifting Advanced Micro Devices above some valuation targets. It’s currently rated as a ‘Moderate Buy’, based upon 14 ‘Buy’, 11 ‘Hold’, and one ‘Sell’ recommendation. Price targets now range from a low of $50 to a street-high $120 while the stock closed Friday’s session about $3 above the median $81 target. This placement suggests that further upside will be limited without fresh upgrades.

Technically speaking, the stock is extremely overbought after gaining more than 60% so far in the third quarter, raising odds for a multi-week range or deep retracement. The turnaround may have already begun because bear power has increased since the uptrend hit an all-time high at 87.29 more than two weeks ago, forcing weekly relative strength indicators to roll over. Even so, weakening technicals have yet to issue a strong sell signal so an assault on 100 is still possible.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Main Trend Changed to Down on Friday

The technology-driven September E-mini NASDAQ-100 Index dropped sharply on Friday as investors fled market-leading tech shares due to mixed earnings reports and growing signs of a worsening coronavirus pandemic, which could exacerbate a deep economic recession. Geopolitical uncertainties also added to investor skittishness ahead of the weekend.

On Friday, September E-mini NASDAQ-100 Index futures settled at 10460.75, down 87.50 or -0.84%.

For the second day in a row, the tech sector weighed heaviest on all three major U.S. stock averages. Intel led the decline on Friday, its shares plunging after the chipmaker reported a delay in production of a smaller, faster 7-nonmeter chip.

In other news, Intel rival Advanced Micro Devices Inc shares jumped, while Tesla Inc extended Thursday’s losses.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through 10358.75 on Friday changed the main trend to down. The main trend will change to up if buyers take out the pair of main tops at 11058.00 to 11058.50.

The first short-term range is 9728.75 to 11058.50. Its 50% level at 10393.50 was tested on Friday.

The second short-term range is 9368.25 to 11058.50. Its retracement zone at 10213.25 to 10014.00 is the next downside target zone.

The third range is 8841.00 to 11058.50. Its retracement zone at 9949.75 to 9688.00 is another potential support area.

The combination of the retracement zones creates a potential support cluster at 10014.00 to 9949.75.

Short-Term Outlook

Our best downside target on Monday is 10014.00 to 9949.75. Since it is a potential support cluster, we’re anticipating that counter-trend buyers will show up on a test of this area. This could trigger a technical bounce.

If 9949.75 fails then the market is going to move into the wide retracement zone at 9949.75 to 6988.00. Aggressive counter-trend buyers could step in on a test of this area also.

Despite the change in trend to down, we’re still looking for a labored break because of the large number of retracement levels. This could create choppy, two-sided trading conditions.

For a look at all of today’s economic events, check out our economic calendar.

Advanced Micro Devices At Cusp Of A Major Breakout

Advanced Micro Devices Inc. (AMD) has defied skeptics so far in 2020, posting an all-time high in February and then recouping a 38% pandemic-driven decline by mid-April. Rally momentum stalled after the company reported inline Q1 2020 metrics one week later, highlighted by 40% growth in year-over-year revenue. Mixed guidance failed to stir buying interest, triggering an 11% downdraft that found support at 49. That trading floor has held firm into the third quarter.

Well-respected CEO Dr. Lisa Su took a victory lap after the report, declaring “we executed well in the first quarter, navigating the challenging environment to deliver 40% year-over-year revenue growth and significant gross margin expansion, driven by our Ryzen and EPYC processors”.  She offered a sober-but-upbeat outlook, noting “while we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets”.

AMD Taking Market Share From Rivals

Advanced Micro Devices should benefit from repeated delays in Intel Corp. (INTC) server platform and other time-sensitive projects, allowing the smaller fabricator to take market share. It’s also growing central processing unit (CPU) sales at a healthy clip and has grabbed a fair share of the graphics processing unit (GPU) market from rival NVidia Corp. (NVDA). That segment has been growing exponentially since pandemic shutdowns began in the first quarter.

Wall Street And Technical Outlook

Wall Street consensus now rates the chip stock as a ‘Moderate Buy’, with 12 ‘Buy’ and 9 ‘Hold’ recommendations. No analyst currently advises that shareholders sell their positions and step to the sidelines. Price targets range from a low of $33 to a street-high $70 while the stock is now trading more than $7 below the median $57.50 target.  This positioning bodes well for additional gains in the third and fourth quarters.

Advanced Micro Devices’ technical outlook is much stronger now than three months ago, with the stock carving a horizontal trading range at the February 2020 high. In turn, this price action has completed the handle in a bullish cup and handle pattern that forecasts an impressive breakout, with the potential to reach a measured move target in the lower 80s. That rally, if it unfolds, would book an impressive 35% and 40% return from the currently-traded level.

With GPU Sales Cooling After Crypto Craze, Investors Ask What’s to Happen With the Mining Infrastructure

For investors who have been watching the cryptocurrency movement over the past year, it’s apparent that the so-called “crypto mania” has come to an end, or at least on hold for a while. After cryptocurrency prices skyrocketed towards the close of 2017, all of the top 10 high market cap coins have now settled into more muted prices down, in some cases, nearly 80% from their all-time highs. Looking at the charts for bitcoin (BTC) and ether (ETH), it’s clear that the impressive bull run has tapered off to arguably more sustainable levels.

Bitcoin (BTC)

Bitcoin Daily Chart
Bitcoin Daily Chart

Ether (ETH)

ETH/USD Daily Chart
ETH/USD Daily Chart

As with nearly everything in the economy though, industries are connected together one way or another. One of the questions many in the cryptocurrency world hadn’t considered after the decline of crypto prices is how that fall will impact other facets of the economy. That fall in cryptocurrency prices, along with an increased focus on newer consensus mechanisms that aren’t processing-intensive (like different variants of proof-of-stake over the current proof-of-work model), has led to a decline in sales of graphics processing units (GPUs) for producers like AMD and Nvidia. While mining on the Bitcoin network is dominated by ASIC miners, other cryptocurrencies are still largely mined viaGPU mining operations, though that could soon be changing.

Crypto GPU Sales Down

Nvidia, the popular GPU manufacturer known for making a variety of cards for the gaming industry and, more recently, the crypto mining industry, recently announced a “substantial decline” in revenue from cryptocurrency miners. According to the company’s CFO Commentary on Second Quarter Fiscal 2019 Results, the company was anticipating a drop in GPU sales, though the reality was more significant than they accounted for.

According to the report, “Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”

Competitor AMD is in a similar situation as well. After releasing second quarter earnings earlier in the summer, the chip producer noted that their quarter-over-quarter decline in revenue in the computing and graphics segment was “primarily related to lower revenue from GPU products in the blockchain market.”

Cryptocurrency prices aren’t the only factor to blame for the decline in GPU sales either. One of the topics at the center of the cryptosphere right now is about alternatives to the standard consensus mechanism known as proof-of-work (PoW). As newer methods are proposed, developed, and eventually implemented, GPU sales are likely to continue declining in the crypto-related industry.

Heavy Infrastructure Investment

Besides trading and investments made directly in the cryptocurrency world, there has been a significant amount of investment funneled into business related to the crypto industry as well. Unlike the early days of bitcoin, cryptocurrency miners are no longer individual enthusiasts running gaming PCs in their bedroom.

Nowadays, there are entire cryptocurrency mining operations being funded and built across the globe. In Montana, US, Power Block Coin LLC is investing $251 million into a new cryptocurrency mining farm where the facility will be stocked full of mining equipment, and they’re not alone.

In upstate New York, US, there’s an even larger cryptocurrency mine under construction. The new facility in Massena, NY is being built by Coinmint and is estimating up to $700 million in investment going to the mining operation. But with all this funding being put into mining farms and large-scale operations, investors in these ventures are beginning to wonder what’s to come of them in the event that they become obsolete in the crypto world or if interest in mining dies off more. Here are some of the alternatives.

Crypto Mining Alternatives

While the cryptocurrency markets are cooling down on GPU mining, there are still viable alternatives for all the hardware and infrastructure created in the industry. Looking back to the comments from Nvidia’s CFO, there’s another area that led strong growth throughout the year that aided in offsetting a decline in crypto-related GPU sales. According to the CFO commentary:

“GPU business revenue was $2.66 billion, up 40 percent from a year earlier and down 4 percent sequentially, led by record performance in Gaming, Professional Visualization, and Datacenter, offsetting a substantial decline in cryptocurrency GPUs.”  

Professional visualization, video rendering, and developing AI are all areas of the tech economy that cryptocurrency farms can look to in the future. If investors are looking for a return on their investment, farm operators still have options. In fact, there are companies in the space already angling themselves for a significant shift in the coming years.

Marco Iodice is the co-founder of Leonardo Render, a blockchain-based startup working on incorporating much of the infrastructure already in place for mining to profit from large-scale, enterprise-level graphical rendering needs in the growing CGI industry. All of those mining farms can put their GPUs to work for them not mining, but as a means for graphical rendering. He sees the same thing that Nvidia saw in revenue as well and believes there are other solutions for miners, saying that:

“In 2017 we witnessed the ‘gold rush’ of GPUs with people gathering as much hardware as possible to grab some crypto, which caused the price of hardware to skyrocket along with the price of cryptocurrencies. Now that the market is down and there’s less interest in mining, many have hardware that is only worth half of the purchase value. So the best solution, in my opinion, is to keep the equipment so carefully collected and assembled and wait for a new way of using it, ideally more profitable and less volatile than crypto mining.”

Similarly, Tatau is another blockchain-based startup that’s focusing on using the infrastructure to fill other demands. Like Leonardo Render, Tatau is connecting those with computational power across the industry to put their machines to work not for mining, but for outsourcing jobs that require large amounts of computing power. In the case of Tatau, that’s being done for developing AI and the compute-intensive processes associated with it.

Regardless of what the future holds for the cryptocurrency markets, the current state is no longer supporting GPU mining at the scale that it once was. Because of that, investors need to start looking at alternate ways for these mining operations to be put to use. Significant investments were made to create the farms, now it’s up to business owners and investors to ensure the infrastructure is adaptable for the future of the crypto world.

Advanced Micro Devices, Inc. (NASDAQ:AMD) Takes Fight To Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA) After Stellar Q1 Results

Advanced Micro Devices, Inc. (NASDAQ:AMD) stock rallied after the company provided a second-quarter forecast that topped estimates. Investors also pushed the stock higher on the chipmaker posting first-quarter financial results that beat Wall Street expectations.

AMD Q1 Financial Results

The company reported earnings of 11 cents a share, beating analysts’ estimates of 9 cents a share. Last year, the company reported a net loss of (-$0.04) a share. Revenue in the first quarter was up 40%, to $1.65 billion and in the process beat Wall Street estimates of $1.57 billion.

Revenue growth was attributed to growth in the Graphics business Segment that posted revenues of $1.12 billion representing a 95% increase. Revenue could have been much higher had the Enterprise and Semi-Custom segment not posted a 12% drop in revenue that came in at $532 million. AMD attributes the decline to a drop in semi-custom revenue.

AMD also reported solid margins for the first quarter that came in at $36%, compared to 4% as of the end of the first quarter of last year. Lead operating income stood at $120 million compared to just $11 million. After struggling for almost a decade to post profits, AMD reported $114 million increase in net income that came in at $81 million.

For the current quarter, the company said it is expecting $1.72 billion in revenue compared to estimates of $1.58 billion. Blockchain accounted for 10% of the company’s revenue. However, the chip giant has warned of a potential decline in graphics revenue in connection to the blockchain.

Revenue Growth Drivers

Stellar first-quarter earnings and a positive second-quarter outlook underscores the success that AMD is getting with its Ryzen and Vega-based GPUs. AMD is increasingly becoming Ryzen driven company given that 60% of its revenue came from the sales of Ryzen products. The company is also benefiting from an increase in the prices of average desktop chip

The chip giant is already taking the fight to the likes of Intel Corporation (NASDAQ: INTC) with its Epyc server chips as it looks to gain market share in the lucrative marketplace. According to the Chief Executive Officer, Lisa Su, the company is poised to control mid-single-digit server unit share before the end of the year.

“I will say, for the first-generation Epyc, we’re seeing really nice customer interest, and it’s quite broad. And so it is across enterprise as well as the hyper-scale customers. And we view this as a multigenerational play, so we’re very excited about what Epyc can do over the next couple of quarters,” Su saidda.

AMD is slowly gaining a competitive edge against its fierce rivals after stealing market share from NVIDIA Corporation (NASDAQ: NVDA) in the graphics card market The Company also stole some market share from Intel in the Desktop chip market.

Focus going forward is on the launch of the second and third generation of the Epyc chips with production set for early next year. In addition to the Epyc Chip AMD continues to attract interest from companies with large data centers testing out its AMD Radeon graphics cards designed to handle artificial intelligence workloads.