AMD acquires server builder ZT Systems for $4.9 billion, vertically integrating custom AI server design.
Advanced Micro Devices announced on Monday that it plans to acquire server maker ZT Systems for $4.9 billion as it seeks to expand its portfolio of artificial intelligence chips and hardware and compete with Nvidia. AMD plans to pay for 75% of the acquisition with cash and the remainder in stock. As of the second quarter, the company had $5.34 billion in cash and short-term investments available.
The strategic importance of this deal stems from the computing requirements for AI, which have dictated that tech companies string together thousands of chips in clusters to achieve the necessary data crunching horsepower. As the makeup of whole server systems has become increasingly important, AMD determined that acquiring ZT Systems would be essential to its AI ambitions. "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 allow AMD to more quickly test and roll out its latest AI graphics processing units at the scale that cloud computing giants such as Microsoft require. "The main way (ZT Systems) is additive to the company is we sell more GPUs," Su said.
The closely held ZT Systems currently generates annual revenue of roughly $10 billion and employs approximately 2,500 people, of which AMD plans to retain about 1,000 engineers. ZT Systems Chief Executive Frank Zhang will join AMD and report to the company's data center chief, Forrest Norrod. AMD plans to break off its server manufacturing business and sell it once the deal closes, as it has no plans to compete with companies such as Super Micro Computer. AMD has not yet held talks with potential buyers. Executives expect the deal to close in the first half of 2025 and anticipate an additional 12 to 18 months to sell the manufacturing business. AMD expects ZT Systems to contribute to the company's adjusted financial performance by the end of 2025.
The acquisition reflects broader industry shifts in the AI hardware market. Nvidia CEO Jensen Huang said at the company's developer conference in March that the one-time chip designer now creates and sells entire data centers or the individual components needed to build one. Analysts expect Nvidia to generate $105.9 billion from its data center segment this year, which includes chips and other AI hardware. By comparison, Su said last month that AMD expects to collect roughly $4.5 billion in AI chip revenue this year, with customers including Microsoft and Meta Platforms. AMD's move to vertically integrate hardware and engineering capabilities underscores the competitive pressure to offer comprehensive AI infrastructure solutions alongside its GPU offerings.