Fudzilla says its inside sources know of a new Microsoft deal with AMD

Xbox 720 â??will be powered by AMDâ??

The next home console released by Microsoft will use AMD’s GPU tech, according to reports.

Tech site Fudzilla – which has a mixed record of success with trade speculation – is suggesting that AMD will continue its partnership with Microsoft after developing the Xenos custom GPU for the 360.

“We’ve learned from industry sources that AMD has already won the GPU deal for the next generation XboX console,” the website says.

“It looks like Microsoft was happy with first Xeons GPU and it wants to continue using the same, especially since the new ATI GPU should keep the compatibility with legacy games.”

Fudzilla goes on to claim that Microsoft initially intended to release the Xbox 720 in 2010, in-line with a recent gaffe by Microsoft CEO Steve Ballmer, but pulled out of the deal.

The news follows recent speculation that Nvidia has scored a contract to develop tech for the next Nintendo DS.

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