Yesterday, favorite portfolio holding Advanced Micro Devices (AMD) announced a new $8 billion share repurchase authorization. The new authorization is in addition to the $4 billion program announced in May 2021, under which the company has completed about $3 billion. 

Why does this buy-back program matter? A company buying back shares increases the value for stakeholders. Imagine the company has 10 shares outstanding on the market, and you own 2, meaning you own 20% of the company. If the company uses the cash flow to buy back 5 shares from the open market, they reduce the outstanding shares to 5. You still own 2 shares, but now your stake is out of 5 outstanding shares, so you now own nearly 50% of the company.

Additionally, for a growth stock, being able to return capital to shareholders while also delivering revenue growth is highly likeable by the market. Growth companies are expected to use their cash flow to reinvest in R&D, do merger& acquisitions with the purpose of sustaining and/or continuing revenue growth. The fact that AMD can deliver nearly 50% revenue growth year-over-year and still buying back shares speaks strongly to the exceptional executional skills of CEO Lisa Su.

Furthermore, especially for AMD's case, rewarding shareholders while delivering spectacular growth signifies its superiority to Intel (INTC). Intel has flat revenue growth (below 10%), and they are currently needing to invest to find higher revenue growth. The fact that AMD is giving money back to shareholders while sustaining high growth shows to the market that Intel is really behind AMD.  

Lastly, whenever you know that a company has a shares buyback program in place, everytime you want to buy the stock on the dip, you have the assurance that likely the CEO is in there buying the stock with you. 

Connection to the recently-closed Xylinx acquisition

Don't think this buy-back has nothing to do with last week's completion of the Xylinx company. Remember, AMD purchased Xylinx in an all-stock deal valued at roughly $50 billion, will boost AMD's push into the data center chip market where Intel (INTC) has long been a dominant player. AMD has already been finding success there, with its data center revenue in 2021 doubling on a year-over-year basis. Bringing Xilinx into the house only bolsters the gain in market share and drives revenue growth. We believe that CEO Lisa Su is very confident about how much cash Xylinx is going to generate for AMD as a whole now, that's why she's very generous with this buy-back. Remember, the buy-back authorized last year was half of this size, $4 billion. 

Where's the stock?

Look at the chart of AMD since last year and notice the run that AMD went on after the May 2021 $4B buyback. They are about to do a $8B buyback now.