China Server Deal Gives AMD Stock Biggest Surge in 35 Years

Stock spikes 52 percent as troubled chipmaker unveils joint venture with Chinese Academy of Sciences

Yevgeniy Sverdlik

April 23, 2016

1 Min Read
Red flags flutter in the wind near the Chinese national emblem outside the Great Hall of the People in Beijing, China.
Red flags flutter in the wind near the Chinese national emblem outside the Great Hall of the People in BeijingFeng Li/Getty Images

With global PC shipments steadily declining and its behemoth of a rival Intel controlling virtually the entire data center market, the last several years have been tough on AMD, which has struggled to win back share of the x86 server market, make meaningful inroads in the nascent ARM server market, or grow its share of the GPU market, where its chief competitor Nvidia rakes in about 80 percent of all revenue.

Related: Intel: World Will Switch to “Scale” Data Centers by 2025

Against this bleak backdrop, the injection of optimism from Thursday’s announcement of a big server technology licensing deal with a Chinese government-backed company sent the Sunnyvale, California-based chipmaker’s stock up more than it has risen in the past 35 years, according to Bloomberg. Its shares saw a 52-percent spike, reaching $3.99 at market close Friday, the biggest increase since 1980.

AMD CEO Lisa Su said on the company’s earnings call Thursday that AMD expects higher demand for its graphics processors and custom chips. The company forecasts its second-quarter revenue will be 15 percent higher than first-quarter revenue, which was $832 million – down nearly 20 percent year over year.

Its licensing deal is with Tianjin Haiguang Advanced Technology Investment, a joint venture between AMD and the Chinese Academy of Sciences. The JV will design server chips based on AMD’s intellectual property for the Chinese market only.

China is the world’s biggest processor market, according to Bloomberg, but foreign companies have to partner with Chinese entities to do business there. Intel also recently entered into a server-focused joint venture with Chinese partners, while Qualcomm, the biggest player in the mobile chip market, has a JV with the Guizhou Province, according to the Wall Street Journal.

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