US semiconductor giant Advanced Micro Devices (AMD) Inc. will acquire New Jersey-based hyperscale server maker ZT Systems in a $4.9 billion cash-and-stock deal that would further the chipmaker’s artificial intelligence (AI) capabilities as it competes against Nvidia Corp.
Under the terms of the agreement, the California-based company stated that ZT Systems will join its Data Center Solutions Business Group to incorporate its computing infrastructure design business.
Its server manufacturing segment is planned for a sale to a “strategic partner” once the arrangement closes, although talks with prospective buyers have yet to be done.
The firm will pay 75% of the purchase with cash, while the remainder will be in stock. As of the second quarter, AMD held $5.34 billion in cash and short-term investments. The transaction also includes a $400 million contingent payment, provided specific milestones are achieved.
Executives forecast the first half of 2025 for the deal’s closing and another 12 to 18 months for the sale of ZT Systems’ manufacturing division.
AMD Expanding AI Capabilities to Thrive Against Nvidia
AMD expects the acquisition to further its prowess in developing AI systems and software, potentially bolstering sales of its chips and other systems that run on its chips.
The company is ramping up its AI efforts to take on Nvidia, which is currently dominating the AI chip market.
The second-largest provider of graphics processing units (GPUs) is seen as the top challenger to Nvidia in AI processors. It estimated its latest MI Series Accelerators to generate over $4.5 billion in revenue this year, while analysts projected Nvidia to bring in $100 billion in data center revenue this fiscal year.
AMD chief executive Dr. Lisa Su said procuring the help of ZT Systems’ 1,000 engineers would speed the test and release of their latest AI GPUs at a level similar to tech giants such as Microsoft Corp.
The firm is also including software and hardware functions that would allow it to keep up with Nvidia’s offerings and accelerate the utilization of its chips.
AI has become more complex over the years, increasing the need for big tech companies to enhance their systems to better handle critical AI computing tasks such as training and inferencing.
In the last 12 months, AMD has spent over $1 billion to expand in the AI market. It also acquired Europe’s largest private AI lab Silo AI in July in an all-cash deal worth $665 million, adding an AI model developer to its portfolio.
