AMD gets Chinese approval to buy Xilinx for $35 bln

Preliminary approval by Chinese regulators of a purchase deal announced a year ago has pushed up Xilinx and AMD securities.

One of the conditions of the regulators was the company’s continued supply of Xilinx products to China, as well as cooperation with enterprises in China to prevent the possibility of limiting or eliminating competition as a result of the deal.

European, U.S. and British regulators also approved the deal. According to a December announcement by Xilinx and AMD, the deal is expected to be finalized in Q1 of this year.

The acquisition of Xilinx will make AMD’s business even stronger.

Under the terms of the deal, AMD will own 74% of the merged company, while Xilinx will own the remaining 26%. Annual savings as a result of the deal should amount to $300 million, as both companies use similar methods in chip development. The deal will also benefit AMD’s fast-growing data center chip business and help expand the joint addressable market.

This is good news for AMD stock, which should embolden buyers to leave negative territory.

Interest in shares of U.S. tech giants is waning

According to The Wall Street Journal, the past week, marked by high volatility, has led investors to change their attitudes toward shares of large tech giants. They prefer to analyze stocks in more detail in terms of ups and downs in order to pick the most attractive ones.

The companies that make up the FAANG group have shown significant growth over the past three years. Among them, in particular, Amazon and Apple. But since the beginning of this year their securities have been losing in price.

During this period, the decline of the FANG+ group amounted to 10%, which is worse than the market dynamics. At the same time, for example, Netflix’s decline amounted to 38% from the maximum values. At the same time, the S&P 500 index was down 6.2% from record highs. According to Amy Kong, chief investment officer at Barrett Asset Management, the group’s shares have shown resilience for more than 10 years, but now their resilience has cracked.

Last quarter’s results for Meta, which owns Facebook and Instagram, were disappointing. The result was a drop of more than $230 billion in a trading session. That’s a historic record for the U.S. stock market.

Executives of some tech giants say that the pace of growth may slow down compared to the strong growth seen earlier. Meta said that there has been a decline among users in spending on the most profitable services, so revenue growth rates will inevitably slow.

It was also followed by a statement from streaming service Netflix about lower growth in the number of subscribers in the quarter. The announcement sent the stock down 22% during the trading session. This hasn’t been seen in 10 years since 2012.

The growth of volatility on the market is related not only to the reporting season, but also to investors’ expectations of tightening of monetary policy by the US regulator.

Against the backdrop of these expectations, the yield on US Treasuries reached its highest since 2019, and the securities of technology companies began to sell off actively. They are losing value amid more attractive yields on US government securities.

Over the next few days, investors will have to evaluate the growth rates of tech giants Uber Technologies Inc. and Twitter Inc. to see if they are slowing down or not.

In the meantime, we are suspending any action on these securities.

Regeneron Pharmaceuticals pleases with reports

Regeneron Pharmaceuticals reported 104.5% year-over-year revenue growth to $4.95 billion, beating estimates of $460 million. Adjusted net income grew 151% year-over-year to $2.7 billion. Adjusted earnings per share came in at $23.72, beating estimates by $3.67.

The revenue from sales of Eylea drug in the U.S. grew by 13% p.a. and reached $2.5 bln, the revenue from sales of Dupixent drug grew by 51% to $1.8 bln. During the 4th quarter sales of drugs for treatment of coronavirus infection amounted to $2.3 bln and excluding them the revenue of the biotechnology company demonstrated a 17% year-on-year growth.

The growth potential of the securities is estimated at 21.2%. The yield on the company’s shares for the last 12 months amounted to 24.9%.

We recommend buying the company’s shares with the nearest target at $755.