AMD returns to deal making with $1.9 billion purchase of chip specialist Pensando

Advanced Micro Devices Inc. plans to buy chip and software startup Pensando Systems Inc. for $1.9 billion, returning to the acquisition playbook shortly after closing its biggest-ever transaction.

The proposed deal, which AMD disclosed Monday, would add to its product palette as semiconductor vendors reposition their offerings to take advantage of growing demand for chips. Pensando would give AMD capabilities in the fields of networking, security and other services aimed at the data-center market, which has grown explosively as companies embrace digital tools.

Pensando, based in Milpitas, Calif., produces chips and software designed to speed data flow and lower operating costs for big server farms, AMD said.

AMD shares advanced 1.4% in midday trading on Monday.

NVIDIA CONSIDERS TEAMING UP WITH INTEL ON CHIP MANUFACTURING

There has been a rush of deal making in the chip industry in recent years, including AMD’s own $35 billion purchase of chip maker Xilinx Inc., which closed in February. Graphics-chip giant Nvidia Corp. pursued British chip-design firm Arm but called off the blockbuster transaction in February amid regulatory challenges. Chip maker Intel Corp. has sold its memory-chip business in China to South Korea’s SK Hynix Inc. Qualcomm Inc. on Monday said it closed a previously agreed deal that gives it control of driver-assistance-technology company Arriver, previously a unit of Swedish autonomous-driving specialist Veoneer.

The deal-making bonanza has taken shape against a backdrop of soaring demand for computers, phones, cars and other devices that need chips to operate. The shift toward working from home during the pandemic led more people to buy computers and use internet services that run on chips from AMD and its peers. Semiconductor sales last year surpassed $500 billion for the first time, and some industry analysts and executives expect them to roughly double to $1 trillion within the decade.

INTEL CEO URGES CONGRESS TO ‘ACT NOW’ ON DOMESTIC CHIP PRODUCTION

With demand soaring, many semiconductor companies had seen their stocks rise before the broader market slumped after Russia invaded Ukraine on Feb. 24. The higher valuations for chip companies helped fuel deal-making.

AMD, the longtime also-ran in providing chips that power the world’s computers and servers, has in recent years gained a performance edge on Intel, its main rival in CPUs, sending its stock to new heights. The company also has a big business supplying graphics-processing chips for personal computers and videogame consoles.

AMD had a 10.7% share of the market for data-center CPUs in the final quarter of 2021, according to Mercury Research, up by 3.6 percentage points from a year earlier.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Pensando, founded in 2017, has received several rounds of funding from investors including Qualcomm’s venture-capital arm, Hewlett Packard Enterprise Co. and investment bank Goldman Sachs Group Inc., the startup has said.

Pensando Chief Executive Prem Jain and other Pensando employees will join AMD following the acquisition, AMD said. The deal is expected to close in the current quarter, subject to regulatory approvals and some other steps, it said.