On April 4, Advanced Micro Devices (NASDAQ:AMD) announced it is buying Pensando, a distributed services platform. The acquisition is worth $1.9 billion. That’s dwarfed by the $35 billion AMD paid for adaptive computing specialist Xilinx in 2020, but it was significant enough to act as a catalyst for AMD stock. Unfortunately, for shareholders, the market reaction hasn’t exactly been enthusiastic. On Wednesday morning, AMD shares shot down by as much as 4.5% before recovering slightly in the afternoon.

The market reaction to the acquisition announcement has AMD shares once again flirting with the $100 level — for the fourth time this year. As I have said practically every time AMD stock has suffered a drop in 2022 (the latest just a few days ago), investors looking for long-term growth stocks should be viewing these events as a buying opportunity.

The Pensando Acquisition Bolsters AMD’s Data Center Business

What is Pensando, what does it do, and why did AMD buy the company? How will the Pensando acquisition benefit AMD stock growth? These are all good questions. By the time I’m finished answering them, you’ll see that the move only bolsters the case for adding AMD shares to your portfolio.

The global data center market is a lucrative one, and it’s growing. A recent report pegged the value at $215.8 billion for 2021, with projections it will grow to $288.3 billion by 2027. That’s a CAGR of 4.95%.

Advanced Micro Devices has made big strides in capturing PC market share through several generations of Ryzen processors. AMD processors are in more desktop PCs and laptops than ever before. The company is also making inroads in the data center market with its EPYC server chips. However, it hasn’t yet had the same degree of success there. It has been good — AMD reported data center revenue doubled in 2021 thanks to strong EPYC sales — but the company senses opportunity to do even better.

Pensando is a popular distributed services platform. Pensando solutions include chips and software used to route information within computer system networks. The scalable solutions offload some of the workload from the server CPUs, making processes faster and more efficient. The company has a deep list of well-known enterprise clients.

Adding Pensando technology to AMD’s EPYC servers makes the case for data centers to switch to AMD even more compelling. As AMD CEO Lisa Su said in the announcement: “Today, with our acquisition of Pensando, we add a leading distributed services platform to our high-performance CPU, GPU, FPGA and adaptive SoC portfolio. The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level which expands our ability to offer leadership solutions for our cloud, enterprise and edge customers.”

AMD Is a Proven Semiconductor Stock

From my perspective, the Pensando acquisition is a shrewd move on AMD’s part. It should help accelerate growth in the company’s data center business. This will turn the division into an even bigger engine for AMD stock growth.

And we do have to talk about AMD stock growth. Shares are down by nearly a third so far in 2022. That’s not on AMD so much as it is a reflection of uncertainty over economic factors like inflation and interest rates.

Look back over the past five years and you see a semiconductor stock that has reliably delivered big returns. There have been hiccups like a 2018 crash when the bottom fell out of the crypto market (and killed demand for graphics cards), but AMD quickly recovered and resumed big gains. Over the past five years (even with 2022’s slide) AMD stock has delivered growth of 656%. That’s the kind of performance that would make AMD a cornerstone of any growth portfolio.

Bottom Line: Should You Buy AMD Stock Now?

The market may not be reacting positively to AMD’s acquisition of Pensando, but that doesn’t mean you should be concerned. Nothing is certain these days, but AMD is a low-risk bet with a “B” rating in Portfolio Grader. With AMD stock once again flirting with $100, it’s a great time to buy more shares.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place