In a strategic move to bolster its position in the competitive artificial intelligence (AI) and data center markets, Advanced Micro Devices (AMD) announced on Monday its plans to acquire server manufacturer ZT Systems for $4.9 billion. This acquisition, a mix of cash and stock, is part of AMD's broader strategy to expand its AI ecosystem and compete more effectively with industry giant Nvidia.
AMD's decision to acquire ZT Systems comes at a time when the demand for high-performance computing and AI capabilities is surging. The increasing complexity of AI systems has created a pressing need for advanced infrastructure that can efficiently handle massive amounts of data. This acquisition is expected to provide AMD with the necessary expertise and resources to meet this demand and expand its presence in the AI market.
Lisa Su, AMD's CEO, emphasized the importance of AI systems to the company's future. "AI systems are our number one strategic priority," Su said in an interview with Reuters. She highlighted that the acquisition of ZT Systems would enable AMD to accelerate the development and deployment of its AI graphics processing units (GPUs) at the scale required by cloud computing giants like Microsoft and Meta Platforms.
ZT Systems, a privately held company based in New Jersey, has been a key player in designing and building critical computing and storage infrastructure for some of the world's largest cloud companies. With this acquisition, AMD aims to leverage ZT Systems' expertise in system design and rack-scale solutions to enhance its data center AI systems and customer enablement capabilities.
"Our acquisition of ZT Systems is the next major step in our long-term AI strategy," Su stated. She added that the deal would strengthen AMD's ability to deliver end-to-end data center AI infrastructure at scale, working alongside its ecosystem of original equipment manufacturers (OEMs) and original design manufacturers (ODMs).
AMD plans to fund 75% of the acquisition through cash, with the remaining 25% in stock. As of the second quarter, AMD had $5.34 billion in cash and short-term investments, positioning it well to execute this deal without straining its financial resources. The acquisition is expected to close in the first half of 2025, with ZT Systems contributing to AMD's adjusted financial performance by the end of that year.
While AMD will integrate ZT Systems' computing infrastructure design business, it has no plans to enter the server manufacturing market. Instead, AMD intends to sell ZT Systems' data center infrastructure manufacturing business to a strategic partner within 12 to 18 months after the deal closes. This move aligns with AMD's focus on expanding its AI hardware and software capabilities without competing directly in the server manufacturing space.
Following the acquisition, ZT Systems CEO Frank Zhang will join AMD and report to Forrest Norrod, AMD's executive vice president and general manager of the Data Center Solutions Business Group. Zhang expressed enthusiasm for the deal, stating, "We are excited to join AMD and together play an even larger role designing the AI infrastructure that is defining the future of computing."
ZT Systems' President Doug Huang will also play a critical role in the integration process, leading the design and customer enablement teams. Both Zhang and Huang will be instrumental in ensuring that ZT Systems' expertise is fully integrated into AMD's operations.
AMD's acquisition of ZT Systems underscores the growing competition in the AI and data center markets. Nvidia, AMD's chief rival, has been expanding its offerings beyond chips to include entire data center solutions, a move that has been well-received in the market. Analysts expect Nvidia to generate $105.9 billion from its data center segment this year, a figure that dwarfs AMD's expected $4.5 billion in AI chip revenue.
By acquiring ZT Systems, AMD aims to close this gap and position itself as a formidable player in the AI infrastructure space. The deal is part of AMD's broader strategy to create a comprehensive AI ecosystem that includes high-performance GPUs, CPUs, and networking products, all designed to work seamlessly together in data center environments.
