AMD, one of the leading tech companies, recently announced its plans to acquire server maker ZT Systems for $4.9 billion in an effort to expand its portfolio of artificial intelligence chips and hardware to compete with Nvidia. The acquisition will be funded by 75 per cent cash and the rest in stock, utilizing the company’s $5.34 billion in cash and short-term investments. The increasing demand for computing power in AI applications has prompted tech companies to cluster thousands of chips together, making the composition of server systems crucial, leading to AMD’s decision to acquire ZT Systems.
Following the announcement, AMD’s shares saw a nearly 3 per cent increase in premarket trading, with CEO Lisa Su emphasizing that AI systems are their number one strategic priority. The addition of ZT Systems engineers will enable AMD to accelerate the testing and rollout of its latest AI GPUs on a scale required by cloud computing giants like Microsoft. This move is expected to drive increased GPU sales for AMD, with plans to sell off its server manufacturing business once the deal is finalized to focus on GPU sales without competing with existing providers.
ZT Systems Chief Executive Frank Zhang will join AMD, maintaining roughly 1,000 engineers from the current 2,500 total employees. AMD has not yet initiated talks with potential buyers for the server manufacturing business but expects the deal to close in the first half of 2025, followed by an additional 12 to 18 months for the sale of the manufacturing business. Analysts predict a substantial increase in revenue for AMD’s data center segment, driven by AI hardware sales, while Su anticipates significant AI chip revenue for the company this year, with customers including major tech giants like Microsoft and Meta Platforms.
With the acquisition of ZT Systems, AMD aims to improve its adjusted financial performance by the end of 2025. The deal is seen as a strategic move to bolster AMD’s position in the AI chip and hardware market, challenging competitors like Nvidia who have expanded to offering entire data centers or components needed to build one. The integration of ZT Systems is expected to enhance AMD’s capabilities in AI technology and strengthen its presence in the rapidly growing market. As the deal progresses and the manufacturing business is divested, AMD anticipates positive financial results from this strategic acquisition in the coming years, positioning the company as a key player in the AI hardware industry.
In conclusion, AMD’s acquisition of ZT Systems represents a significant step in the company’s efforts to expand its presence in the AI chip and hardware market. By leveraging the expertise of ZT Systems engineers and focusing on GPU sales, AMD aims to drive revenue growth and enhance its competitive position against industry leaders like Nvidia. With a strategic focus on AI systems and technology, AMD expects to see positive financial outcomes from the acquisition, contributing to its long-term success in the evolving tech landscape. As the deal progresses and the integration of ZT Systems unfolds, AMD is poised to solidify its position as a key player in the AI hardware industry, setting the stage for continued growth and innovation in the coming years.
