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Why is Advanced Micro Devices (AMD) Stock Rallying Today?

On Friday, shares of Advanced Micro Devices, Inc. AMD are rallying, up over 35% after the company announced that it is licensing technology to a Chinese, state-backed joint business venture that will produce chips.

Under the terms of the deal, the semiconductor company is expected to receive $293 million in licensing fees including royalties on sales of its x86 chip technology produced by the venture with Tianjin Haiguang Advanced Technology Investment.

This announcement was part of AMD’s better than expected first quarter earnings report, where the company incurred a loss of -$0.14 per share but beat the Zacks Consensus Estimate of $-0.15. Revenues came in at $832 million, topping our consensus estimate but declining 19% year-over-year.

Thanks to these results, AMD provided an upbeat second quarter outlook, with revenues anticipated to increase 12%-18% from the previous quarter, totaling $932 million-$982 million, well above the consensus of $890 million.

AMD’s boost in share price can also be attributed to rumors that the chip maker is working on processors for three new gaming consoles for Nintendo, Sony, and Microsoft, and the potential $1.8 billion in revenue from these new ventures.

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