Should You Buy AMD Stock On Intel Deal Rumors? Advanced Micro Devices Inc

Rumor Says AMD To Sign A Deal With Intel To Edge Out Nvidia

Shares of Sunnyvale California-based Advanced Micro Devices Inc (NSDQ:AMD)surged by close to 9% on Tuesday, on rumors of a “signed and done” deal with Intel (NSDQ:INTC) to license its GPU tech. These rumors suggest that Intel could put AMD’s Radeon graphics technology in its integrated GPUs (iGPUs). Asimilar deal has reportedly cost Intel a sizeable amount since 2011. So, such an arrangement could clearly help AMD financially. More importantly, the rumored deal is likely to edge out arch-rival NVIDIA (NSDQ:NVDA). But should you buy into these rumors?And if yes, how big will the impact be on AMD?

Intel AMD Rumors – There’s No Smoke Without Fire

As Kevin Krewell points out in his article on Forbes, there’s onlyone source from which all of these rumors have originated, HardOCP editor-in-chief,Kyle Bennett. And there’s no official word on this ‘deal’ yet, from either AMD or Intel, which makes it, unconfirmed-yet, at best, and dubious, at worst. What’s more, as Krewell explains in his post, Intel currently has a licensing agreement with AMD’s arch-rival Nvidia, which some would argue, has better products than AMD. However, a lot of sources seem to think the deal could really come through. Why?

For starters, that agreement expires in March 2017, opening up the possibility for a replacement, be it with better products, or simply better terms. In this context, it’s important to note that Intel’s deal with Nvidia came as part of a legal settlement back in 2011, and has reportedly cost Intel around $1.5bn over the yearsas per a SEC filing by Nvidia. All of this makes it a tad bit more likely that Intel might want to get out of the arrangement post March next year.

While such rumors have been around since as early as March this year when Jared Newman of PC World mooted the idea, Krewell backs Kyle Benett saying:

“While Kyle Bennett can be a controversial character, he has been around the PC business for many decades and has excellent contacts with AMD, NVIDIA, and Intel. You would not expect Mr. Bennett to make such a statement without a good source to back it up.”

These are only some of the points Krewell makes, in his compelling case on why the rumors may actually end up being true. In case you’re wondering why Intel needs one of the two GPU makers at all, Krewell’s post makes for a good read. Coming to the next point, what could this deal mean for AMD?

Estimating The Impact On AMD

Yet another rationale could be that Intel might actually have more bargaining power with AMDthan it would with Nvidia, which not only dominates most of the GPU marketbut is also currently on a ‘hypergrowth’ cycle, as some would put it. As we said before, reports suggest that Intel has incurred an expenditure of around $1.5 billion over the course of its arrangement with Nvidia. And while we wouldn’t want to speculate on what such a deal could mean in Dollar terms for AMD, given that Intel’s current deal was signed in 2011, you’d expect the monetary value of a replacement to at least match the previous one.

Do note that $1.5 billion is the value of the deal, spread over the life of the agreement, which in this case, is about 6 years. Given the state AMD is in right now, where growth is just about picking up again, AMD might find a similar offer quite attractive. To put that into perspective, AMD hasregistered just over $3.1 billion in revenue this year. So, what’s likely to be on offer won’t be chump change.

Which Brings Us To The Next Point – What About AMDs iGPUs Then?

It’s an important question. Intel clearly has the lead so far when it comes to CPUs, and if the deal goes through, AMD could end up providing the ‘Chipzilla’ with better GPU tech than it (Intel) could come up with. In essence, it might sound as if AMD is handing over it’s primary competitive advantage to Intel on a silver platter. However, that might not be the case.

For starters,reports suggest that AMD will be providing Intel with GPU instruction sets rather than actual physical GPUs:

“What itdoesn’t mean though is Intel using actual AMD silicon in their own chips, but more likely using different GPU instruction sets they previously licensed from Nvidia instead.”

AMD is on the verge of launching its Zen line-up of CPUs, which is expected to be fairly competitive when compared with Intel’s CPU chips.QuotingDigital Trends:

“we are also told that AMD will also offer some overclocked, and potentially overclocking rated, chips for as much as $500. Regardless of pricing though, it sounds like this generation may be the first in a long time that can compete directly with top-end Intel chips. The eight core/16 thread configurations are said to be capable of taking on Intels i7-6850K, which costs as much as $600.”

Further, according toWccftech, AMD’s upcoming line up of Vega GPUs could be better than Nvidia’s ‘top dog’, the$1200 GTX Titan X. And eventually, AMD plans to put the two (Zen CPU+Vega GPU) to roll out a mega-chip for enterprise servers and supercomputing. So, it won’t be surprising if AMD decides to back itself to take on Intel’s integrated chips.

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