by Advanced Micro Devices ( AMD ) CEO Lisa Su believes the chip designer’s blockbuster Xilinx acquisition has gone according to plan since closing in February, with more benefits on the horizon. The acquisition of Xilinx helped AMD further diversify its business away from personal computers, significantly increasing the company’s ability to serve energy industries such as aerospace, automotive, and telecommunications. This is on top of AMD’s multi-year work around the data center, which is a key reason why we like the company’s long-term outlook despite our current more cautious view on chip stocks. “Things have gone very well. Our acquisitions have worked out exactly as we hoped,” Su said in an interview with CNBC on Wednesday, a day after Club Holding reported third-quarter results amid a difficult macroeconomic environment for semiconductor companies. The results were slightly weaker than analysts expected, although AMD reported disappointing preliminary numbers in early October. Despite missing estimates, third-quarter revenue rose 29% to $5.57 billion. AMD expects fourth quarter revenue of approximately $5.5 billion to remain roughly at the same level as the previous quarter. The only two segments where AMD sees revenue growing sequentially in the fourth quarter are data centers and what it calls “embedded,” home to Xilnix sales in the aforementioned areas and others such as defense. Conversely, management expects AMD’s traditional end markets – PCs and gaming, primarily on the graphics side – to continue to weaken in Q4 compared to the third quarter. This shows how a company’s diversification strategy can work during the cyclical fluctuations that the semiconductor industry is known to experience from time to time. Its newer focus areas – data center and embedded – will hold up for now, although there are weaknesses in parts of the company’s consumer-focused end markets. While it’s not clear when these tough times in the chip sector will end, Su told Jim Cramer that the AMD-Xilinx pairing has the potential to improve further due to intellectual property synergy. After all, it’s been less than a year since the companies started sharing the roof. “With the Xilinx portfolio, we’ve actually been able to help accelerate its growth. [embedded] when looking at the supply chain and just the demand for these products. It’s worked very well,” Su said. “I’m actually even more excited about what we’re going to see in the future as we integrate some of our products into AMD processor IP with some Xilinx AI and other acceleration IP. . We think it’s going to be a fantastic portfolio.” So far, AMD’s data center business has proven “relatively resilient” in the face of economic headwinds, Su said, growing 45% year-over-year to $1.6 billion in the third quarter. In the second quarter, data center revenue was $1.5 billion, 83 % more than in 2021. As mentioned, AMD expected data center revenue in the current fourth quarter to exceed the $1.6 billion it generated in the three months ended September 24. Next week, AMD is set to unveil its latest data center chip, called Genoa, part of the company’s Epyc under the server processor brand. This is a significant step forward in the company’s market share battle with Intel ( INTC ) as, under Su’s leadership, AMD has tried to deliver consistent product innovation to the market. Intel’s next-generation data center chip, called Sapphire Rapids, has been delayed and has m due to be published next year. In recent years, AMD has taken advantage of Intel’s mistakes. AMD has started some shipm Genoa chips “to select customers,” Su said on Tuesday night’s earnings call. Production accelerates in the last quarter. “I think [Genoa] continues to power us in the cloud centers as well as in the enterprise,” Su told CNBC on Wednesday. “What we’re seeing here is that we’re really expanding our lead because it’s not just about performance, but also about the importance of power efficiency, especially today when energy prices are rising all over the world.” also worth noting that while U.S. restrictions on sales of certain high-end chips to China have hurt semiconductor companies like Nvidia ( NVDA ), AMD reiterated after its earnings conference call Tuesday night that the rule changes are not significant for its business, the same thing AMD said , when the government’s export measures were first announced in late August. (Jim Cramer’s Charitable Trust is long AMD. See a full list of stocks here.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Lisa Su, CEO of AMD
David A. Grogan | CNBC
Advanced micro devices ( AMD ) CEO Lisa Su believes the chip designer’s blockbuster Xilinx acquisition has gone according to plan since it closed in February, with more benefits on the horizon.
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