US chipmaker, Advanced Micro Devices (AMD), has announced plans to acquire server maker, ZT Systems, for $4.9 billion in a bid to expand its portfolio in artificial intelligence (AI) chips and hardware, and strengthen its position against industry leader Nvidia.
The acquisition will be funded with 75% cash and the remainder in stock. As of the second quarter, AMD had $5.34 billion in cash and short-term investments. This acquisition highlights the growing importance of complete server systems in handling the vast computing requirements for AI, where thousands of chips are linked in clusters to maximise data processing power.
AMD CEO, Lisa Su noted that the tech giant held AI systems as its number one priority. She added that integrating ZT Systems engineers will allow AMD to more quickly develop and deploy its AI GPUs at the scale required by cloud giants such as Microsoft.
AMD shares rose over 2% following the announcement, while Nvidia shares gained 1.4%. Analysts view the acquisition as a positive move for AMD’s long-term revenue strategy, enhancing its grip on data centre customers.
Once the deal closes, AMD plans to spin off ZT Systems’ manufacturing business, indicating no intention to compete with companies like Super Micro Computer. ZT Systems generates around $10 billion annually, largely from its manufacturing unit, and AMD expects the deal to contribute to its financial performance by the end of 2025.
ZT Systems CEO Frank Zhang will join AMD, and approximately 1,000 of ZT’s 2,500 employees will be retained, leading to $150 million in annual operating expenses. The deal is expected to close in the first half of 2025, with AMD planning to sell off the manufacturing unit within 12 to 18 months after the acquisition.
AMD anticipates the acquisition will accelerate revenue growth by 2026, with CFO Jean Hu stating that initial dilution in 2025 will be offset by increased GPU sales, creating a break-even effect. Analysts believe this move will help AMD expand its business with cloud customers and position it as a stronger competitor in the AI hardware space.
