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I spent Tuesday afternoon in a midtown Manhattan ballroom, listening to Victor Peng, who took over this year as chief executive of Xilinx (XLNX), lay out a new vision of the company, one focused squarely on how the company’s chips can propel artificial intelligence.

There was nothing ugly in the talk, only some good and some bad points, as far as the Street is concerned. The reaction, however, has been a decline in the shares today of $2.91, or 4%, at $68.76.

First, the bad: Analysts are not entirely comfortable with the company’s plan to boost spending this year by 10%, slightly faster than projected rise in revenue of 8% to 10%, for the fiscal year that began this quarter.

Morgan Stanley’s Joseph Moore, reiterating this morning an Outperform rating and a $78 price target, defends the company’s spending, writing that unlike in the past, spending is "more directly tied to enthusiasm about future prospects” such as AI.

The good news, by most accounts, was the company’s expectation that its addressable market for chips in the data center will rise to $4.6 billion by 2023, a compound annual growth rate of 67% from just $600 million in 2019.

That data center forecast is the foundation for Peng’s projection that from 2019 to 2023, revenue growth should accelerate to greater than 10%.

Peng outlined multiple routes to achieving its share of that market, which it thinks could amount to $1 billion in revenue come 2023, up from relatively little data center revenue today. One route is selling plug-in circuit boards with its chips, rather than just the chips themselves, turning Xilinx into a “platform” company.

Credit Suisse’s Joseph Moore thinks the increased operating expense to do so will pay for itself, as the "R&D dollars are likely to drive long-term share gains and moats.”

And the second is a new line of chips that will “tape out” this fall, known as "Adaptive Compute Acceleration Platform,” or ACAP, which he has said is a “totally new category” of chip from either Xilinx’s traditional “FPGAs,” or field-programmable gate arrays, or competing kinds of chips, the Nvidia (NVDA) GPU. The chip has new features that include digital-signal-processor parts, and embedded memory circuitry, to allow for great flexibility in customizing the circuitry.

Mark Lipacis of Jefferies, who came away “confident” in the company, notes that “Management is optimistic about this new platform,” meaning ACAP, "because it is fully software programmable, and is designed to be dynamically reconfigured for a diverse set of applications, which should improve its utilization and ROI.” That dovetails with Peng’s point, made repeatedly, which is that Xilinx parts already server many markets, including networking and storage, not just computing, unlike Nvidia.

Asked about Intel (INTC), which has its own FPGAs, from having bought Altera, Peng said that the company’s manufacturing is now struggling with mistakes Intel has made. “They had been so aggressive to show Moore's Law is still going, that they overdid it on packing things,” he said, meaning, "getting more density” of transistors. “Things can actually break when you do that,” said Peng.

Peng also offered a tantalizing reference to a forthcoming technology from Xilinx called “computational memory,” which it is partnering with “a tier-one memory supplier” to make, the name of which company he declined to give. Those chips will not go the usual route of fetching data from memory circuits, but instead will "put memory nearer to processing."

Among the bears on the stock, Macquarie’s Srini Pajjuri is “encouraged,” though he’s waiting for evidence of “meaningful" data center revenue contribution.

But SunTrust’s William Stein is more guarded, a little concerned about the “middle of the road” strategy the company has adopted.

"The company is neither maximizing its growth opportunity (by significantly accelerating OpEx to pursue the datacenter market, that would damage near-term profitability) nor maximizing its near-term profitability (by cutting spending on a market that increasingly feels like it's slipping away to NVDA),” he warns.

Despite technology, Stein sees nothing to prompt "material estimate nor multiple upside to warrant a Buy rating."

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