Key Points:
- AMD has agreed to acquire ZT Systems, an AI infrastructure company, for $4.9 billion in cash and stock.
- The acquisition aims to accelerate AMD’s AI strategy and challenge Nvidia’s dominance in the data center chip market.
- ZT Systems specializes in designing and building custom computing infrastructure for major AI companies.
- AMD plans to integrate ZT Systems’ expertise to enhance its data center AI systems capabilities.
- The deal is expected to close in the first half of 2025, subject to regulatory approvals.
Advanced Micro Devices (AMD) has announced plans to acquire ZT Systems, a leading provider of AI infrastructure, for $4.9 billion in a cash and stock deal. This strategic move aims to bolster AMD’s position in the rapidly growing artificial intelligence market and challenge industry leader Nvidia.
ZT Systems, based in Secaucus, New Jersey, has been designing and deploying data center AI compute and storage infrastructure for major cloud companies for over 15 years. The company’s expertise in building custom computing solutions for AI “hyperscalers” like Microsoft, Meta, and Amazon makes it a valuable asset for AMD’s expansion plans.
AMD CEO Lisa Su emphasized the importance of this acquisition in an interview, stating, “AI systems are our number one strategic priority.” The deal is expected to provide AMD with industry-leading systems expertise to accelerate the deployment of optimized rack-scale solutions. This comes as the company targets a projected $400 billion data center AI accelerator market in 2027.
The transaction includes $4.5 billion in upfront payment, with an additional $400 million contingent on certain post-closing milestones. AMD plans to finance 75% of the acquisition with cash and the remainder in stock. As of the second quarter, the company reported $5.34 billion in cash and short-term investments.
Once the deal closes, ZT Systems will be integrated into AMD’s Data Center Solutions Business Group. Frank Zhang, ZT Systems’ CEO, will lead the manufacturing business, while ZT President Doug Huang will oversee design and customer enablement teams. Both will report to AMD Executive Vice President and General Manager Forrest Norrod.
AMD intends to seek a strategic partner to acquire ZT Systems’ U.S.-based data center infrastructure manufacturing business, as it does not plan to compete with companies like Super Micro Computer in this area. The company expects to retain about 1,000 engineers from ZT Systems’ current workforce of approximately 2,500 employees.
This acquisition marks AMD’s largest since its $35 billion purchase of Xilinx in 2022. It follows a series of investments by AMD to strengthen its AI capabilities, including over $1 billion spent in the last 12 months to expand its AI ecosystem and enhance software capabilities.
The move comes as AMD seeks to challenge Nvidia’s dominant position in the AI data center chip market. Nvidia’s success has been partly attributed to its “systems” approach, offering end-to-end computing infrastructure including pre-packaged server racks, networking equipment, and software tools. AMD’s acquisition of ZT Systems appears to be a step towards building out its own comprehensive “systems” offering.
AMD has been making strides in the AI chip market with its MI300 line of AI chips, which have been adopted by Microsoft for its Azure cloud platform. The company plans to launch its next-generation MI350 chip next year to compete with Nvidia’s new Blackwell line of GPUs.
The transaction is subject to regulatory approvals and other customary closing conditions. AMD expects the deal to close in the first half of 2025 and become accretive to its non-GAAP financial performance by the end of that year.
