By Max A. Cherney
(Reuters) – AMD said on Monday it plans to acquire server maker ZT Systems for $4.9 billion, as the company seeks to expand its portfolio of chips and artificial intelligence hardware and take on Nvidia.
AMD plans to pay 75% of the ZT Systems acquisition price in cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments in the second quarter.
The computing demands of AI have forced tech companies to cluster thousands of chips together to get the data processing power they need. Networking large numbers of chips has made it increasingly important to assemble complete server systems, which is why AMD acquired ZT Systems.
AMD shares rose nearly 3% in premarket trading.
“AI systems are our number one strategic priority,” AMD CEO Lisa Su said in an interview with Reuters.
The addition of ZT Systems engineers will enable AMD to more quickly test and deploy its latest AI graphics processing units (GPUs) at the scale required by cloud computing giants such as Microsoft, Su said.
“ZT Systems’ main contribution to the business is to sell more GPUs,” Su said.
AMD plans to shut down its server business and sell it after the deal closes because it has no plans to compete with companies like Super Micro Computer, Su said.
AMD has not yet held discussions with potential buyers.
Frank Zhang, general manager of ZT Systems, will join AMD and report to AMD’s data center chief, Forrest Norrod.
ZT Systems, a privately held company, has about 2,500 employees, of which AMD plans to retain about 1,000 engineers. ZT Systems currently generates annual revenue of about $10 billion, Su said.
Executives expect the deal to close in the first half of 2025 and anticipate another 12 to 18 months to sell the manufacturing business.
Nvidia CEO Jensen Huang said at the company’s developer conference in March that the former chip designer now creates and sells entire data centers, or the individual components needed to build one. This year, analysts expect the company to generate $105.9 billion from its data center segment, which includes chips and other AI hardware.
Last month, Su said the company expects to generate about $4.5 billion in revenue from AI chips this year. The company’s customers include Microsoft and Meta Platforms.
AMD expects ZT Systems to contribute to the company’s adjusted financial performance through the end of 2025.
(Reporting by Max A. Cherney in San Francisco; Editing by Chris Reese)
