Abu Dhabi Invests in AMD

Dennis Faas's picture

Last Friday, the Mubadala Development Company announced that it was purchasing an 8% ownership of chip maker Advanced Micro Devices for $622 million. Mubdala is a corporation of the government of Abu Dhabi, and serves as a vehicle for the capital of the United Arab Emirates to invest directly in publicly traded companies. (Source: nytimes.com)

This is the second deal that Mubdala has brokered; it recently purchased 7.5% interest in the Carlyle Group. Both the Carlyle and AMD moves are part of Abu Dhabi's plan to diversify its oil revenue with technology investments. (Source: cnetnews.com)

Purchasing stakes in corporations is only part of the Abu Dhabi strategy. Last year, the country bought an interest in Masdar, an investment group designed to fund green technology projects. MIT is also working with Masdar to develop a graduate school in the UAE, whose sole purpose will be to study alternative energies. (Source: cnetnews.com)

Regarding the AMD deal, Khaldoon Khalifa al-Mubarak, chief executive and managing director of Mubadala told The New York Times that, "A.M.D. is a great fit for Mubadala's investment approach. We see significant opportunities for long-term growth and value creation."

AMD has no specific plan for the cash injection and plans to use the funds for ongoing research and development. The chip maker has been facing pressure recently from its main competitor and industry leader, Intel. As the markets closed last week the deal did not stop AMD stocks from taking a minor tumble of 6 cents to $12.64.  The company's stock price has been going down steadily since its $23 per share value in December 2006.

The Mubadala announcement is part of a larger trend of non-Western nations wagering that investments in tech companies and infrastructure will pay high dividends in the years to come. Still, one wonders if this trend of moving from one source of revenue, oil, to another single source, technology, is a little too risky for future financial stability.

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