Microsoft Corp will use an Advanced Micro Devices Inc processor in its next Xbox game console as it seeks to cut the cost of building machines and get developers to create more titles, people with knowledge of the matter said. Shares in AMD surged the most in almost two years.

The Xbox will use an AMD system-on-a-chip that combines powerful "Jaguar" central processing units with graphics chips, said one of the people, who sought anonymity because the plans aren't public. The shift to the so-called x86 format ubiquitous in modern personal computers means Microsoft will drop the Power PC technology designed by International Business Machines Corp and game discs made for the current Xbox 360 won't be compatible.

The switch is a boon for AMD, which is also providing chips for Sony Corp's coming PlayStation 4 as it seeks a larger slice of the $67 billion global video-game market to help lessen its reliance on the shrinking PC industry. Microsoft also stands to benefit because game developers, who have moved toward making games for PCs and mobile devices, will find it easier to deliver those titles for the next Xbox.