AMD’s Bid To Acquire XLNX Spurs Bullish Activity From Options Traders

2020 will go down as one of the strangest years in investing history. We’ve seen a bit of everything. There’s been a full-on crash and recovery (in stocks). We have a company currently worth over $2 trillion. There have even been stocks with no revenues that have been worth over $20 billion (according to the market). And of course, we’ve had crazy amounts of stock buying in bankrupt companies.

We’ve also seen a fair amount of big-name IPOs, especially in the tech space. Snowflake (SNOW) and Palantir (PLTR) are two of the bigger ones to date. Related to that, mergers and acquisitions are once again on the rise. Both tech and financial companies have been active in the past year in this regard.

One area where we’re starting to see a lot of consolidation is in the semiconductor space. Intel (INTC), once the dominant market leader, has been steadily losing ground. Competitors, sensing the opportunity, are gobbling up smaller companies in an effort to compete.  

Now, it seems like Advanced Micro Devices (AMD) wants a shot at the crown. News broke last week that AMD is interested in buying Xilinx (XLNX) in a potential $30 billion deal. There does not appear to be a definitive agreement in place as of this writing. In fact, it’s possible XLNX isn’t interested in being acquired at all.

XLNX, which focuses on programmable chips mostly used in telecom, isn’t necessarily the best fit for AMD, a central processor and graphics card producer. Nevertheless, AMD has had a great year so far and may be looking to expand its empire.

With weakness in INTC, AMD may particularly be inclined to diversify its offerings. Let’s also not forget that money is cheap right now for businesses (ultra-low rates), which helps drive acquisitions. Still, it doesn’t mean shareholders in either company will definitely want to go through with the deal.

What this means is there could be a lot of movement in the stock prices of AMD and XLNX over the next several weeks. However, the action in the options market could be even more important in terms of signaling.

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