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Chip maker AMD pops 4% after sealing deal with Alibaba

Executive Chairman of Alibaba Group Jack Ma.
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Executive Chairman of Alibaba Group Jack Ma.

Chip maker Advanced Micro Devices saw shares of its stock rise about 4 percent on Friday after it announced a collaboration with Alibaba.

Alibaba's cloud computing arm will use AMD technology to expand by improving graphic processing in its data centers, the companies said on Thursday. Alibaba Cloud hosts 35 percent of total websites in China, executive chairman Jack Ma said in a shareholder letter this week.

Cloud computing, which allows users to access data and software from multiple devices, could be used for graphics-heavy processes like gaming, the companies said. The deal comes after AMD released new technology designed to support creation of real-time photorealistic virtual reality content.

Virtual reality has become a key focus area for tech giants like Facebook's Oculus and Alphabet's Google, both of which demonstrated new products in the past month. Alibaba has also deepened its reach in the entertainment space, announcing a partnership with Steven Spielberg's Amblin Partners.

AMD's shares are up 246 percent over the past year, outpacing even fast-growing rival Nvidia. Both firms have benefited from launches of graphics processing units, with Nvidia focused on the premium market and AMD focused on the sub-$200 market, wrote Ian Ing of MKM Partners in a research note last month.