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AMD stock gains after announcing first major share repurchase in its history

Advanced Micro Devices Inc. shares rose Wednesday after the chip maker’s board approved an unprecedented share-repurchase program.

AMD
AMD,
+1.61%

shares jumped more than 3% to an intraday high of $76.97 following an announcement that the company plans to buy back $4 billion in shares over an unspecified period. Shares were last up 2.7%, and the PHLX Semiconductor Index
SOX,
+1.25%

followed along with a 1.9% rise on the day.

That AMD is considering any type of share buyback is itself a milestone — the company has not repurchased any shares since 2001, according to FactSet data, and at that time it only repurchased about $77 million worth of stock. In records dating back to 1980, AMD has spent a total of roughly $100 million on repurchasing stock. That’s unlike other companies in the semiconductor space like Intel Corp.
INTC,
+0.20%
,
which just announced a $10 billion buyback plan back in August, along with recently announced buyback programs from the likes of Applied Materials Inc.
AMAT,
+1.83%

and NXP Semiconductors NV
NXPI,
+1.33%
.

“Today’s announcement reflects our confidence in AMD’s business and the successful execution of our multiyear growth strategy,” said Lisa Su, AMD’s chief executive, in a statement. “Our strong financial results and growing cash generation enable us to invest in the business and begin returning capital to our shareholders.”

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In 2020, AMD reported free cash flow of $777 million, up from $276 million in 2019, according to FactSet data. Before that, AMD hadn’t reported positive cash flow for a fiscal year since 2011. Additionally, AMD finished 2020 sitting on $2.29 billion in cash and short-term investments, its highest level since 2009, when it reported $2.68 billion.

That’s all built upon a renaissance at AMD under the tutelage of Su. Most recently, AMD has shown strong data-center adoption while Intel has lagged, while aggressively building out its portfolio of products and acquiring chip maker Xilinx Inc. for $35 billion, which shareholders recently approved.

AMD shares closed at an all-time high of $97.25 on Jan. 11, and are down nearly 17% for the year. Over the past 12 months, AMD shares have grown 39%, compared with a 68% rally in the SOX index, a 41% gain on the S&P 500 index
SPX,
-0.94%

and a 45% rise on the tech-heavy Nasdaq Composite Index
COMP,
-0.64%
.

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