AMD said Monday it plans to acquire server maker ZT Systems for $4.9 billion, a deal aimed at expanding its offering of artificial intelligence chips and hardware and competing with Nvidia.
AMD plans to pay 75% 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 forced technology companies to cluster thousands of chips to achieve the necessary computing power. Connecting massive numbers of chips has meant that the composition of entire server systems has become 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 told Reuters in an interview.
Su said hiring ZT Systems engineers will allow AMD to more quickly test and deploy the latest AI-based graphics processing units (GPUs) at the scale required by cloud computing giants like Microsoft.
“The main way (ZT Systems) is contributing to the company’s growth is by selling more GPUs,” Su said.
AMD plans to spin off its server business and sell it once the deal is complete because it does not want to compete with companies like Super Micro Computer, Su said.
AMD has not yet held talks with potential buyers.
ZT Systems CEO Frank Zhang will join AMD and report to AMD data center chief Forrest Norrod.
The closely held ZT Systems employs about 2,500 people, of whom AMD plans to retain about 1,000 engineers. ZT Systems currently generates annual revenue of about $10 billion, Su said.
Management expects the transaction to close in the first half of 2025, with the sale of the manufacturing business taking an additional 12 to 18 months.
Nvidia CEO Jensen Huang said at the company’s developer conference in March that the former chip designer now builds and sells entire data centers or the individual components needed to build them. 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 raise about $4.5 billion in revenue from AI chips this year. Its customers include Microsoft and Meta Platforms.
AMD expects ZT Systems to contribute to the company’s adjusted financial results by the end of 2025.
© Thomson Reuters 2024
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