AMD Acquires Server Maker ZT Systems for $4.9 Billion to Boost AI Capabilities

In a major move to expand its artificial intelligence (AI) portfolio and hardware capabilities, AMD has announced its plan to acquire server maker ZT Systems for $4.9 billion. The acquisition aims to help the company compete with its rival Nvidia and strengthen its position in the market.

According to the terms of the deal, AMD will pay 75% of the acquisition price in cash and the remaining 25% in stock. The company had $5.34 billion in cash and short-term investments as of the second quarter. The computing requirements for AI have led tech companies to string together thousands of chips in clusters, making the makeup of whole server systems increasingly important.

AMD’s shares climbed nearly 3% in premarket trading following the announcement. “AI systems are our number one strategic priority,” said AMD CEO Lisa Su 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 (GPUs) at the scale cloud computing giants like Microsoft require.

The main way ZT Systems is additive to the company is that it will allow AMD to sell more GPUs, Su said. 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 like Super Micro Computer. The company has not yet held talks with potential buyers.

ZT Systems Chief Executive Frank Zhang will join AMD and report to AMD’s data center chief, Forrest Norrod. The closely held ZT Systems has roughly 2,500 employees, of which AMD plans to retain about 1,000 engineers. Currently, ZT Systems generates annual revenue of roughly $10 billion, according to Su.

Executives expect the deal to close in the first half of 2025 and expect an additional 12 to 18 months to sell the manufacturing business. 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 individual components needed to build one. This year, analysts expect Nvidia to generate $105.9 billion from its data center segment, which includes chips and other AI hardware.

Su said last month that the company expects to collect roughly $4.5 billion worth of AI chip revenue this year. AMD’s customers include Microsoft and Meta Platforms. The company expects ZT Systems to contribute to its adjusted financial performance by the end of 2025.