AMD Acquires ZT Systems for $4.9B to Strengthen AI Compete with Nvidia

In a strategic move to bolster its artificial intelligence (AI) capabilities, AMD is acquiring server maker ZT Systems in a cash-and-stock deal valued at $4.9 billion. The acquisition is part of AMD's broader strategy to compete more aggressively with Nvidia, a dominant player in the AI chip market.

ZT Systems' Role in Data Center Infrastructure

ZT Systems, headquartered in Secaucus, New Jersey, has been a key player in designing and deploying data center and storage infrastructure for cloud companies over the past decade. The acquisition includes a contingent payment of up to $400 million, dependent on meeting certain post-closing milestones.

AMD's Strategic Plans Post-Acquisition

Following the completion of the deal, AMD plans to sell ZT Systems' server manufacturing business. This decision comes at a time when mergers and acquisitions in the tech sector are under increased scrutiny by the Biden Administration.

Strengthening AI Capabilities to Compete with Nvidia

This acquisition aligns with AMD's ongoing efforts to expand its AI ecosystem. Over the past year, the company has invested over $1 billion in AI-related initiatives, including enhancing its AI software capabilities. These efforts are part of AMD's strategy to compete with Nvidia, which has seen significant demand for its AI-powered chips.

Timeline and Market Reaction

Upon closing, ZT Systems will become part of AMD's Data Center Solutions Business Group. AMD expects the transaction, which has received board approval, to close in the first half of next year. Shares of AMD, based in Santa Clara, California, rose by more than 3% in pre-market trading following the announcement.