TLDR
- AMD announced a $6 billion share buyback program, boosting total repurchase authority to $10 billion
- Shares climbed 4% following the announcement
- Company recently formed a $10 billion collaboration with Saudi AI firm Humain
- AMD is positioned as the second most important AI chip company after Nvidia
- Stock has underperformed compared to peers, falling over 6% this year
AMD announced on Wednesday that its board of directors has approved a $6 billion share buyback program, sending the company’s stock up 4%. This new authorization comes in addition to $4 billion in existing approved share repurchases, bringing the total buyback authority to approximately $10 billion.
“Our expanded share repurchase program reflects the Board’s confidence in AMD’s strategic direction, growth prospects, and ability to consistently generate strong free cash flow,” said AMD CEO Lisa Su in a statement.
The announcement comes just one day after AMD revealed a major collaboration with Humain, an AI company based in Saudi Arabia.
This deal, potentially worth $10 billion in investment, will involve AMD providing graphics processors for AI as well as central processors needed to build AI servers.
Su traveled to Saudi Arabia this week to announce the partnership, following a trend of U.S. technology firms striking AI deals in the Middle East.
Market Position in AI Chip Race
AMD is widely considered the second most important artificial intelligence chip company behind industry leader Nvidia.
The company reported 96 cents in adjusted earnings per share on $7.44 billion in revenue for its fiscal first quarter.
However, AMD’s stock performance has lagged behind some of its peers in the semiconductor sector. Shares have fallen more than 6% so far this year, compared to a less than 1% drop for the Philadelphia Semiconductor Index.
The chip sector as a whole has faced pressure from concerns about AI-linked spending and the impact of global trade tensions.
AMD’s underperformance relative to competitors has raised some questions about its competitive position in the rapidly evolving AI market.
Cash Flow and Financial Position
Despite the large buyback announcement, AMD’s free cash flow in the quarter ended March fell more than 33% to $727 million.
As of March 29, the company reported cash and cash equivalents of $6.05 billion, while current liabilities stood at $7.70 billion.
AMD’s move to repurchase shares follows similar actions by other major chipmakers. Broadcom announced a $10 billion buyback in April, while Qualcomm unveiled a $15 billion stock buyback in November.
Bank of America analyst Vivek Arya responded to AMD’s recent announcements by adding $10 to his price target for the company, bringing it to $130 per share.
The company’s stock closed at $117.72 following Wednesday’s 4.68% gain.
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