AMD announced Monday that it plans to acquire server maker ZT Systems for $4.9 billion, as it looks to expand its portfolio of artificial intelligence chips and hardware and compete with Nvidia.
AMD plans to pay for 75 percent of the ZT Systems acquisition in cash and the rest in stock. The company had $5.34 billion in cash and short-term investments in the second quarter.
The computational demands of AI have dictated that tech companies string together thousands of chips in clusters to achieve the necessary amount of data-crushing horsepower. Stringing together the vast numbers of chips has made the assembly of entire server systems increasingly important, which is why AMD is acquiring ZT Systems.
AMD shares rose nearly 3% in premarket trading.
“AI systems are our top strategic priority,” AMD CEO Lisa Su said in an interview with Reuters.
According to Su, the addition of ZT Systems engineers will allow AMD to more quickly test and deploy the latest AI graphics processing units (GPUs) at the scale required by cloud computing giants like Microsoft.
“The main way (ZT Systems) contributes to the business is because we sell more GPUs,” Su said.
AMD plans to spin off and sell its server manufacturing business once the deal is complete, as the company has no plans to compete with companies like Super Micro Computer, Su said.
AMD has not yet held discussions with potential buyers.
Frank Zhang, CEO of ZT Systems, joins AMD and reports to Forrest Norrod, AMD’s head of data center.
Privately held ZT Systems has about 2,500 employees, of which AMD plans to retain about 1,000 engineers. ZT Systems currently generates annual revenue of about $10 billion, Su said.
Executives expect the deal to close in the first half of 2025, with another 12 to 18 months needed to sell the manufacturing business.
Nvidia CEO Jensen Huang said at the company’s developer conference in March that the former chip designer now creates and sells entire data centers, or the individual components needed to build one. Analysts expect the company to generate $105.9 billion this year from its data center segment, which includes chips and other AI hardware.
Su said last month that the company expects to bring in about $4.5 billion in AI chip revenue this year. The company’s customers include Microsoft and Meta Platforms.
AMD expects ZT Systems to be accretive to the company’s adjusted financial performance by the end of 2025.
© Thomson Reuters 2024
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