AMD announced plans to acquire ZT Systems for $4.9 billion to expand its AI chips portfolio and compete with Nvidia.
AMD plans to fund 75% of the ZT Systems acquisition with cash, using its $5.34 billion in reserves.
AI’s computing demands require massive chip clusters, making server systems crucial; hence, AMD is acquiring ZT Systems.
“AI systems are our number one strategic priority,” AMD CEO Lisa Su said in an interview.
Adding ZT Systems engineers enables AMD to rapidly test and scale AI GPUs for cloud giants like Microsoft, Su stated.
“The main way (ZT Systems) is additive to the company is we sell more GPUs,” Su said.
AMD’s shares rose more than 2%, while Nvidia rose 1.4%.
“No doubt this gives them much stronger lock-in with their data center customers, and because of that,(the acquisition) is a net positive for their long-term revenue strategy,” said Creative Strategies CEO Ben Bajarin.
AMD plans to sell its server manufacturing business post-deal, as it won’t compete with companies like Super Micro Computer.
AMD has not yet held discussions with possible purchasers.
ZT Systems CEO Frank Zhang will join AMD and report to Forrest Norrod, AMD’s data center head.
ZT Systems employs 2,500; AMD will retain 1,000, reducing annual operating expenses by about $150 million.
Currently, ZT Systems earns around $10 billion annually, with most revenue coming from its manufacturing unit.
Executives anticipate the deal closing by mid-2025, with 12-18 months needed afterward to sell the manufacturing business.
AMD anticipates that the transaction will improve its adjusted financial performance by the end of 2025.
CFO Jean Hu stated that initial dilution will be offset by increased GPU sales, leading to break-even, with accelerated revenue growth in 2026.
“The sale of the (ZT Systems) manufacturing business will have no impact onto AMD in the long run,” said Kinngai Chan, a managing director at Summit Insights.
Chan noted that the transaction might help it develop its business catering to cloud users. “Having more engineers helps,” he explained.
At March’s developer conference, Nvidia CEO Jensen Huang noted the shift to selling complete data centers, predicting $105.9 billion in revenue.
Su mentioned last month that the company expects about $4.5 billion in AI chip revenue this year, including customers like Microsoft and Meta.
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