Amkor Technology, Inc. (NASDAQ: AMKR) saw its stock price jump 13.3% in after-hours trading on Thursday, reaching $74.00 by 7 p.m. EDT, following the announcement of a significant packaging contract with Nvidia Corporation (NASDAQ: NVDA). The deal, valued at $1.5 billion, is designed to secure advanced packaging capacity in the United States and includes an unspecified advance payment from Nvidia to Amkor.
The agreement marks a major milestone for Amkor, as it not only strengthens its relationship with Nvidia but also provides financial support for the company's ambitious expansion plans. Amkor has guided for capital expenditures between $2.5 billion and $3.0 billion in fiscal 2026, and the prepayment from Nvidia is expected to help alleviate some of the immediate financing pressures. The $1.5 billion contract amount represents approximately 89% of Amkor's first-quarter net sales of $1.685 billion and is about 6.7 times larger than the company's first-quarter capital spending of $224.6 million.
Under the terms of the multi-year agreement, Amkor and Nvidia will collaborate on high-density interconnects and heterogeneous integration technologies. Amkor currently supplies Nvidia with data-center processors and networking chipsets, and this new deal is expected to accelerate the company's long-term roadmap, according to Chief Executive Kevin Engel.
Investors are now turning their attention to Amkor's second-quarter earnings, scheduled for release on Monday, July 27. Early consensus estimates project revenue of approximately $1.80 billion and earnings per share of $0.47, both closely aligned with the company's guidance range. However, the earnings call is likely to focus heavily on the contract terms, including the size of the prepayment, margin implications, and updates on the timeline for Amkor's Arizona facility.
The stock's after-hours surge follows a volatile week. Amkor shares had fallen 10.7% over the prior full week, closing at $62.94 on July 17, compared to $70.47 on July 10. Before Thursday's announcement, the stock had recovered 3.8% this week. The regular trading session on Thursday ended down 2.45% at $65.33, while the Nasdaq declined 2.15% and the Philadelphia Semiconductor Index slipped 0.5%.
B. Riley Securities lowered its price target on Amkor to $75 from $90 on Wednesday, while maintaining a Neutral rating. With the stock quoted at $74 in after-hours trading, that leaves only a 1.4% potential upside to the new target.
Despite the positive news, several risks remain. The announcement did not specify pricing, margins, or a projected revenue schedule. Amkor also noted that its Arizona site could fall short of budget or schedule projections. Additionally, holders of the company's convertible notes, which were issued in May for $1.15 billion with an initial conversion price of $106.37, could face dilution if the stock rises above that level, though capped call transactions provide some coverage up to $139.50 per share.
The broader market context also warrants attention. The deal comes amid heightened demand for advanced packaging solutions driven by AI and high-performance computing, which bodes well for both Amkor and Nvidia. Investors will be closely watching the earnings call for further details on the contract's financial impact and the company's strategic direction.
