Why AMD's Recent Acquisition Makes the Stock Even More Attractive

Advanced Micro Devices (NASDAQ: AMD) has been one of the market's hottest stocks over the past year, and the announcement that it is set to acquire MEXT could help the company continue its charge higher.

MEXT has developed a memory-optimization technology, driven by artificial intelligence (AI), that can make NAND (flash) memory appear to an operating system as dynamic random access memory (DRAM). It's a memory-tiering software solution that can offload seldom-accessed data from DRAM to unused flash while maintaining performance. Its AI engine continuously analyzes memory access patterns, predicts which data stored in flash will be needed next, and transfers it back into DRAM before an application even requests it.

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It's an innovative technique that can help dramatically reduce memory costs, as DRAM costs about 50 times as much as flash memory. MEXT claims its solution helps expand a system's DRAM capacity by 2 to 4 times while cutting costs in half. With memory in short supply and DRAM costs skyrocketing, this technology could save customers significant money.

Positioning AMD for inference and agentic AI

The acquisition of MEXT will undoubtedly better position AMD in the inference market, which is generally more memory-constrained than power-constrained. The chiplet design the company uses for its graphics processing units (GPUs) already helps pack in more memory, and with MEXT, it can now use memory more efficiently.

AMD will integrate MEXT's technology into its data center product line and make its end-to-end server solutions more attractive. This technology will also help AMD with its transformation from chipmaker to a more complete AI infrastructure player. This began with its earlier acquisition of server maker ZT Systems, which allowed it to sell full systems.

AMD has long been a leader in the data center central processing unit (CPU) market, which is expected to boom with the emergence of agentic AI, as data centers will need a much narrower ratio of GPU to CPUs to run and manage AI agents. With GPUs well-designed for inference, CPUs developed specifically for agentic AI, and now MEXT's memory optimization technology, AMD can offer a differentiated full-rack solution for the booming inference and agentic AI markets.

AMD was already riding two big market waves, and the acquisition of MEXT only strengthens its position. Once an afterthought to Nvidia in the AI infrastructure race, AMD is carving out its own path, and the AI stock looks like a buy given the huge growth opportunities still in front of it.

Geoffrey Seiler has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.