The Epyc 2nd generation chip, manufactured by Advanced Micro Devices Inc. (AMD) is arranged for a photograph during a launch event in San Francisco, California, US, on Aug 7, 2019. (DAVID PAUL MORRIS / BLOOMBERG)

Advanced Micro Devices Inc is in advanced discussions to buy Xilinx Inc in a takeover that could be valued at US$30 billion, according to people familiar with the matter.

Acquiring Xilinx Inc, which makes programmable chips for wireless networks, would help Advanced Micro Devices Inc expand into a new market just as telecommunications carriers spend billions to build fifth-generation, or 5G, networks

The deal could come together as early as next week, though things remain in flux, the people said, asking not to be identified discussing a private deal. The Wall Street Journal first reported on the negotiations.

A combination with Xilinx would give AMD Chief Executive Officer Lisa Su more of the pieces needed to break Intel Corp’s stranglehold on the profitable market for data-center computer components. It would follow moves by rival Nvidia Corp, which bought Mellanox Technologies Ltd and aims to use its pending acquisition of Arm Ltd to grab more of that business.

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Acquiring Xilinx, which makes programmable chips for wireless networks, would also help AMD expand into a new market just as telecommunications carriers spend billions to build fifth-generation, or 5G, networks.

A Xilinx takeover furthers an industry consolidation that’s quickened in 2020. Deal activity in the chip sector has surged this year, including Nvidia’s proposed US$40 billion purchase of Arm. With both of the possible acquisitions, the value of pending or completed semiconductor deals in 2020 would top US$100 billion, the highest in at least 10 years, according to data compiled by Bloomberg.

Xilinx, based in San Jose, California, makes field programmable gate arrays, or FPGAs. That kind of chip is unique because its function can be altered by software, even after it’s been installed in a piece of machinery. Xilinx’s chips have historically been used in telecommunications equipment, but under CEO Victor Peng the company is expanding into products targeted at data centers -- where FPGAs can be used to accelerate workloads such as artificial intelligence. The other major supplier of advanced FPGAs is Intel, which acquired its market position through the purchase of Altera Corp in 2015.

Representatives for AMD and Xilinx declined to comment.

Xilinx shares rose 16 percent in pre-market trading in New York on Friday, while AMD shares fell 2.6 percent. Xilinx closed at US$105.99 on Thursday, at the time giving it a market capitalization of US$25.9 billion, about a quarter of AMD’s value. Shares of Santa Clara, California-based AMD closed at US$86.51. The stock has almost doubled this year.

Under Su, who took the helm in 2014, AMD has surged back from the brink of failure. It’s made gains against longtime rival Intel in desktop computer processors and laptops. The company is also working to reverse its fortunes in the server business, where chips can cost as much as a small car. For years, Intel had relegated AMD to less than 1 percent of that market.

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AMD’s interest in Xilinx reflects the increasing demands of cloud-services providers such as Amazon.com Inc. and Alphabet Inc.’s Google. Those companies are spending heavily on new data centers to meet the surge in demand for computing power delivered via the internet. They’re also racing to enhance services, such as search, with artificial intelligence software, and many companies are experimenting with building their own hardware to do so. That’s putting greater pressure on chip providers to advance their offerings.

For AMD investors, how the company intends to finance the deal may prove crucial in persuading them to sign off. The chipmaker has only recently shed concerns about its cash reserves and was haunted by debt incurred from a takeover of graphics chipmaker ATI Technologies in 2006. At the end of its most-recent quarter, AMD had cash and equivalents of US$1.8 billion, less than several other chipmakers.

Nvidia is using stock to partially fund its purchase of Arm. Analog Devices Inc’s acquisition of Maxim Integrated Products Inc is an all-stock deal. That partly reflects a huge run-up in the value of chip companies in recent years, lead by AMD and Nvidia.

Xilinx shares have not rallied as much. The stock is up 8 percent this year compared with a gain of 27 percent by the Philadelphia Stock Exchange Semiconductor Index. AMD has surged nearly 90 percent, making it the second-best performer behind Nvidia.