Xilinx outperforms AMD
2018 wasn’t great for semiconductor stocks, as several macro and industry-specific headwinds impacted demand. At a time when most chip stocks fell, Advanced Micro Devices (AMD) emerged as an outlier with a 79.8% rise in 2018. The stock has been one of the strongest chip stocks even in 2019 with a 40.7% YTD gain. However, in 2019, one stock, Xilinx (XLNX), has outperformed AMD with a 46% YTD rise.
Xilinx’s stock price momentum
Xilinx’s stock momentum was driven by large price jumps a day after its quarterly earnings release. The stock rose 9.6% on July 26, 2018, a day after it released its fiscal 2019 first-quarter earnings where it reported YoY and EPS growth in the mid-teens after two years of slow growth. The stock rose 15% after the next earnings release on October 24, 2018, and 18.4% after the next earnings release on January 23, 2019. Xilinx’s stock rose 72.7% in one year.
Xilinx is currently trading at a record high of above $120 and close to its 52-week high of $130.57. There is a possibility that the stock could make a new 52-week high a day after it reports its next earnings on April 24. Such strong growth brings us to the question of what made investors bullish on the stock. The answer is 5G (fifth generation).
Xilinx is a leader in the FPGA (field programmable gate array) market. FPGAs allow programming at the hardware level and are commonly used in communications infrastructure. The investment in 5G infrastructure is increasing the demand for FPGAs in the communications space. However, Xilinx is also seeing growing adoption of FPGAs by data center customers for compute, networking, and storage, which has made data center its fastest-growing market.
Xilinx’s strong growth looks similar to that of NVIDIA (NVDA), which rose 225% in 2016 when its GPUs (graphics processing units) were adopted by data centers for AI (artificial intelligence) workloads. The 5G and data center opportunity will likely drive Xilinx’s stock in 2019.
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