3 Reasons Why This AMD Analyst Is Optimistic On Chipmaker's Pensando Deal

Advanced Micro Devices, Inc. AMD announced Monday an agreement to buy distributed services platform company Pensando for $1.9 billion.

The AMD Analyst: KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating and $165 price target for AMD shares.

The AMD Thesis: KeyBanc is constructive on the Pensando deal, analyst Vinh said in a note.

Pensando is a data processing unit provider, specializing in providing hardware and software stacks to accelerate networking, security, storage, and other services for cloud, enterprise and edge applications, the analyst said. It also strives to reduce total cost of ownership, he added.

Pensando's products are currently deployed at scale across cloud and enterprise, and the company has among its customer base several high-profile tech companies such as Microsoft Corporation's MSFT Azure and Goldman Sachs Group, Inc. GS, the analyst noted.

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Vinh said his optimism on the deal stems from three factors. Firstly, Pensando's programmable packet processor, or DPU, and software stock will likely strengthen AMD's product offerings in heterogeneous computing, the analyst said.

Secondly, the analyst sees a niche opportunity for AMD to cross-sell to Pensando's customer base and thereby expand its reach. Thirdly, Pensando will likely enhance AMD's R&D capability to accelerate its data center roadmap.

AMD Price Action: At last check, AMD shares were down 2.11% at $108.20. The stock rose a little over 2% on Monday in reaction to the deal announcement.

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