Breaking Down The Reasons An Advanced Micro Devices Deal With Intel Not Likely To Happen

Advance Micro Devices, Inc AMD shares sold off by 12.1 percent last Wednesday after investors were disappointed the company didn’t announce a new GPU licensing deal with Intel Corporation INTC. Earlier in the week, IT news website Fudzilla had reported that Intel had signed a licensing deal with AMD after a prior deal with NVIDIA Corporation NVDA expired in March.

Weighing The Probability

Not only did AMD fail to mention an Intel deal at its Analyst Day on Tuesday afternoon, Citi analyst Christopher Danely said the AMD and Intel are unlikely to agree to any such GPU licensing deal in the future. A deal with AMD simply wouldn’t make sense for Intel, Danely said.

Intel’s deal with Nvidia grants Intel access in perpetuity to all Nvidia patents filed prior to the deal’s expiration on March 31. The only Nvidia patents Intel will no longer have access to are the patents Nvidia filed/files after March 31.

“In our view, the obligation to Nvidia is over and done, with no compelling need for Intel to license patents from wither Nvidia or AMD for legal protection,” Danely said.

A deal with AMD would also fail to protect Intel from potential patent disputes with Nvidia as well.

AMD and Nvidia shares have been headed in opposite directions after both companies reported their first quarter earnings. In the past three months, Nvidia shares have surged higher by 24.9 percent, while AMD shares have plummeted 19.1 percent. Even after the selloff, there may be more downside ahead for AMD shareholders, Danely said.

Citi maintains a Sell rating for AMD stock.