Advanced Micro Devices (AMD) announced on Monday its plans to acquire server maker ZT Systems for $4.9 billion, marking a significant move in its strategy to expand its artificial intelligence (AI) chip and hardware portfolio. This acquisition positions AMD to compete more aggressively with industry leader Nvidia (NVDA) in the rapidly growing AI market.
The deal structure involves AMD paying 75% of the acquisition price in cash, with the remaining 25% in stock.
As of the second quarter, AMD reported $5.34 billion in cash and short-term investments, indicating a strong financial position to support this strategic move.
AMD CEO Lisa Su emphasized the company’s focus on AI, stating, “AI systems are our number one strategic priority.”
The acquisition of ZT Systems is aimed at enhancing AMD’s capabilities in developing and deploying AI-focused graphics processing units (GPUs) at the scale required by major cloud computing providers like Microsoft (MSFT).
ZT Systems’ expertise in server manufacturing is expected to accelerate AMD’s ability to test and roll out its latest AI GPUs. Su highlighted that the primary benefit of the acquisition would be increased GPU sales for AMD.
Interestingly, AMD plans to divest ZT Systems’ server manufacturing business post-acquisition, as it does not intend to compete with established server manufacturers like Super Micro Computer. The company has not yet initiated discussions with potential buyers for this part of the business.
As part of the deal, ZT Systems CEO Frank Zhang will join AMD, reporting to the company’s data center chief, Forrest Norrod. AMD intends to retain about 1,000 engineers from ZT Systems’ current workforce of approximately 2,500 employees.
ZT Systems, a privately held company, currently generates annual revenue of around $10 billion. The acquisition is expected to close in the first half of 2025, with an additional 12 to 18 months anticipated for the divestiture of the manufacturing business.
This strategic move by AMD underscores the growing importance of AI in the semiconductor industry and highlights the company’s commitment to strengthening its position in this crucial market segment.
Price Action
As of the last check, AMD was up $6.18, or 4.15%, trading at $154.60 per share.
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