Santa Clara, California: AMD announced on Monday that it will acquire server manufacturer ZT Systems for $4.9 billion, aiming to bolster its portfolio in artificial intelligence (AI) chips and hardware and intensify its competition with Nvidia.
The acquisition will be financed with 75% cash and the remainder in AMD stock. As of the second quarter, AMD held $5.34 billion in cash and short-term investments. This move is part of AMD’s strategy to enhance its capabilities in managing the large-scale computing requirements of AI, where thousands of chips are clustered to achieve necessary data processing power.
“AI systems are our number one strategic priority,” said AMD CEO Lisa Su in an interview with Reuters. The integration of ZT Systems will enable AMD to accelerate the testing and deployment of its latest AI graphics processing units (GPUs) at the scale required by major cloud computing firms like Microsoft, Su added. “The main way [ZT Systems] is additive to the company is we sell more GPUs.”
Following the acquisition, AMD plans to divest its server manufacturing business, as it does not intend to compete with firms like Super Micro Computer. Discussions with potential buyers for this segment have not yet begun.
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ZT Systems CEO Frank Zhang will join AMD and report to Forrest Norrod, AMD’s data center chief. The acquisition involves retaining about 1,000 of ZT Systems’ 2,500 employees. ZT Systems currently generates annual revenue of approximately $10 billion.
The deal is expected to close in the first half of 2025, with an additional 12 to 18 months required to complete the sale of AMD’s server manufacturing business. Nvidia CEO Jensen Huang highlighted at a March developer conference that Nvidia has expanded from chip design to selling entire data centers and components. Analysts project Nvidia’s data center segment to generate $105.9 billion this year.
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Su also mentioned last month that AMD anticipates $4.5 billion in AI chip revenue this year. Key customers include Microsoft and Meta Platforms (META.O). AMD expects ZT Systems to positively impact its adjusted financial performance by the end of 2025.
