AMD has announced plans to acquire server maker ZT Systems for $4.9 billion in a strategic move to enhance its artificial intelligence (AI) chip and hardware portfolio, intensifying its competition with Nvidia. The acquisition will be funded through a combination of 75% cash and the remainder in stock. As of the second quarter, AMD held $5.34 billion in cash and short-term investments.
The rapidly increasing demands of AI computing, which require vast clusters of interconnected chips to process enormous amounts of data, have made server architecture critical. AMD’s acquisition of ZT Systems is a direct response to these needs, allowing the company to accelerate the testing and deployment of its AI GPUs on a large scale, particularly for cloud computing giants like Microsoft.
“AI systems are our number one strategic priority,” AMD CEO Lisa Su stated in an interview with Reuters. Su emphasized that the integration of ZT Systems’ engineering team will enable AMD to expand its GPU sales and meet the growing demands of the AI sector. AMD’s shares rose nearly 3% in premarket trading following the announcement.
Once the deal is finalized, AMD plans to divest ZT Systems’ server manufacturing business, indicating no intention to compete with companies like Super Micro Computer. The company has yet to initiate discussions with potential buyers for this segment.
ZT Systems, a privately held company with approximately 2,500 employees, will see around 1,000 of its engineers transition to AMD. The server maker currently generates about $10 billion in annual revenue. ZT Systems CEO Frank Zhang is expected to join AMD, reporting to Forrest Norrod, AMD’s data center chief.
The acquisition is projected to close in the first half of 2025, with AMD estimating an additional 12 to 18 months to complete the sale of the manufacturing business. By the end of 2025, AMD anticipates that ZT Systems will contribute positively to its adjusted financial performance.
This move comes as Nvidia, a key competitor, continues to dominate the AI hardware market. Analysts predict Nvidia will generate $105.9 billion from its data center segment this year. Meanwhile, AMD has forecasted approximately $4.5 billion in AI chip revenue for 2024, with major clients including Microsoft and Meta Platforms.
