Advanced Micro Devices, Inc. (NASDAQ:AMD) shares jumped on Thursday morning and were performing strongly through the middle of the day as fresh rumors that Microsoft Corporation (NASDAQ:MSFT) was going to try to buy the firm drove trading. Talk on the street has been very unreliable in the past, so this story should be taken with a grain of salt.
At time of writing shares in Advance Micro Devices were up by more than 4%, though they were falling as no solid news of a rumor had emerged since talk began before the market opened on Thursday. Shares hit a high of $2.63, their high for the day so far, right around 10:30 AM this morning.
Volume spike drives Advance Micro Devices story
Like so many other buy-out rumors, today’s supposed deal between Advance Micro Devices and Microsoft emerged after a spike in volume in early trading. There were a few spikes in volume in the minutes leading up to the spike in the firm’s share price this morning, and they weren’t repeated through the afternoon.
Rumors like this morning’s story of a Microsoft bid for Advance Micro Devices are often driven by a volume spike. Traders try to guess if the increase in trading is from insiders trying to buy in before good news hits, and rumors can stick around for a lot longer than actual trading volume does.
at KitGuru kicked off the story of an AMD-Microsoft deal on June 29. He said a source had informed him that Redmond had approached AMD some months ago in order to try to strike a deal.
Most of the news surrounding the deal has been about whether Microsoft is looking to lower hardware costs by investing in AMD, but no clear story emerged. Mr. Shilov said that “The acquisition of AMD could save it around a billion per year on Xbox One chips alone. It the company develops appropriate chips for smartphones and tablets, Microsoft’s savings could be even higher.”
Microsoft gives clear signal on hardware
Buying a chip-maker would move against most of the speech of current Microsoft CEO Satya Nadella. Mr. Nadella, who replaced device-loving Steve Ballmer at the helm of the firm, released a new mission statement on June 26 that erased devices from the heart of the firm.
Those with shares in Microsoft tend to hate any talk of devices as it brings up ugly memories of the $900 million Surface write-down, and fears of a similar Nokia write-down in the months ahead. An AMD deal may be designed t create a higher-value package that Microsoft can create in order to sell its total hardware business as a single piece down the line.
Talk of the firm making a smartphone that runs on Android gives weight to that idea, but there’s no way to tell how the firm would go about such a plan, and no concrete info that it has made one step in that direction.
For now stock in AMD is sinking, and it appears that those traders who thought it would be part of Microsoft by the end of the day are losing out right now.
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