LONDON Neither Advanced Technology Investment Co. LLC (ATIC), the majority shareholder in foundry chip maker Globalfoundries Inc., nor Advanced Micro Devices Inc. are likely to be affected by the Dubai debt crisis, according to a note from financial analysts FTN Equity Capital Markets Corp.
Last week, state-owned Dubai World had said it would delay repaying some of its debt by six months. The company, with debts of $59 billion, was estimated to be holding almost three quarters of the State of Dubai's total debt of $80 billion. As a result concerns grew that Abu Dhabi, a neighboring state in the United Arab Emirates, might be forced to bail out Dubai.
A further worry was that the debt crisis could threaten funding for Globalfoundries (Sunnyvale, Calif.).
The share price of microprocessor vendor Advanced Micro Devices Inc. (Sunnyvale, Calif.), also came under pressure as it ramps up Globalfoundries to manufacture processors. Another Abu Dhabi government investment vehicle, Mubadala Development Co., owns 19 percent of AMD.
"We believe these concerns are unwarranted and are reiterating our BUY rating on AMD. We are also raising our estimates on lower interest expenses anticipated through reduction of 2012 debt," FTN analysts said in the note.
It now appears that Abu Dhabi is likely to bail out Dubai World, but the problem appears manageable.
"In all, ATIC has committed approximately $12 billion to the AMD/Globalfoundries effort and has set aside $4 billion to $6 billion just for the build-out of Dresden and New York facilities," the note to investors said. "These commitments are ring-fenced from any other funding needs and activities. All indications point to an acceleration of the spending timetable at Globalfoundries, rather than a slowdown."