In this series, we discussed how Xilinx (XLNX) is investing heavily to encourage the adoption of FPGA (field programmable gate array) into the mainstream data center market. So far, Xilinx is ahead of rival Intel (INTC) in terms of technology, and it’s been teaming up with cloud companies to boost its FPGA sales. Most recently, the company announced an order from Amazon (AMZN) Web Services, marking a significant achievement in the data center space.
Xilinx’s next big growth may likely come in the communications market with the deployment of 5G. All these growth signs are being received well by shareholders and analysts alike.
What pushed Xilinx stock to a 52-week high?
Xilinx’s stock rose to its 52-week high of $60.52 on December 15, 2016, after Morgan Stanley analysts upgraded the stock from “equal weight” to “overweight.” FPGAs are slowly gaining ground in the cloud market, and analysts believe that Xilinx has the potential to tap the growth in machine learning in the same way that Nvidia (NVDA) has been achieving growth in AI (artificial intelligence).
Nvidia’s stock has risen ~200% in just one year, driven by strong demand for its GPUs (graphics processing units) in the gaming, data center, and automotive space. Its data center segment has more than doubled in one year and now contributes 12% of the company’s total revenues. Notably, it took Nvidia five years to make its own mark in the data center space.
But this is just the beginning for FPGAs, and it may take a few years for them to penetrate the mainstream data center market. Still, analysts expect Xilinx to witness more than 20% annual growth in calendar 2017, as 99.9% of data centers have not yet deployed any accelerators. If Xilinx secures one or two more orders from large cloud companies, it could easily increase its annual growth.
Hedge funds increase stake in Xilinx stock
These positive developments have attracted optimism not only from analysts but also from hedge funds. According to a report by Insider Monkey, 41 hedge funds held long positions in Xilinx stock at the end of calendar 3Q16, representing a 14% sequential growth. Among these hedge funds, a few increased their stake in Xilinx significantly.
Wall Street analysts now have a consensus “hold” recommendation on the stock, with a median price target of $50, which the stock has already crossed. The stock has a bullish price target of $70, which it may cross if it reports better-than-expected earnings or secures another order.