AMD aims to catch up to Nvidia in AI battle with $4.9B acquisition — chipmaker strengthens AI ecosystem with ZT Systems' expertise in server design

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Chipmaker will pay $4.9 billion to help design better AI data center products.

AMD AI
(Image credit: AMD)

AMD has agreed to pay $4.9 billion to acquire ZT Systems, which designs and manufactures equipment for artificial intelligence (AI) and cloud computing data centers. The deal is one of AMD’s biggest acquisitions and aligns with the chipmaker’s plans to reduce Nvidia’s dominant position in AI.

ZT Systems was founded in New Jersey in 1994. It designs and manufactures servers, server racks, and other important infrastructure for data centers. ZT Systems is one of the leading providers of AI and general-purpose compute infrastructure for hyperscale providers.

According to AMD chief executive Lisa Su, ZT Systems has more than $10 billion in annual sales. That’s almost half of AMD’s $22.7 billion revenue in 2023. Su believes the acquisition will improve upon “the investments [AMD has] made to accelerate [its] AI hardware and software roadmaps.”

Once the deal closes, ZT Systems CEO Frank Zhang will join AMD’s Data Center Solutions Business Group. Zhang will lead the manufacturing business, while ZT president Doug Huang will head up the design and customer enablement teams. Both will report to AMD executive vice president and general manager Forrest Norris.

AMD won’t keep the manufacturing side of ZT Systems, though. The plan is to sell the manufacturing capability to “a strategic partner” and use ZT Systems to propel AMD’s ability to custom-design AI training clusters and data centers. Su sees that as the main value ZT Systems can provide to AMD.

Su called the acquisition “the next major step in our long-term AI strategy to deliver leadership training and inferencing solutions that can be rapidly deployed at scale across cloud and enterprise customers.”

This is the latest in a series of investments AMD has made to strengthen its AI capabilities. The company has increased its organic research and development activities and invested more than $1 billion to expand its AI ecosystem and improve its AI software capabilities.

The deal is expected to close by the first half of 2025, assuming there aren’t any regulatory hurdles or closing conditions to overcome. If all goes well, the acquisition should increase AMD’s revenue by the end of 2025.

Jeff Butts
Jeff Butts
Contributing Writer

Jeff Butts has been covering tech news for more than a decade, and his IT experience predates the internet. Yes, he remembers when 9600 baud was “fast.” He especially enjoys covering DIY and Maker topics, along with anything on the bleeding edge of technology.

4 Comments Comment from the forums
  • DavidLejdar
    Where ZT Systems started at, that's where a number of companies moved their datacenters to, in the 90s. I.e. NYSE and NASDAQ have their datacenters there as well. That's on a bit different level, than just "office server B2B". And sure sounds like there is a lot of expertise there (system engineering).

    Not sure, I would go all-in on AMD stock though. ZT's solutions do have hardware from Nvidia, Intel, and AMD. I.e. "the XPO200-3UA PCIe Expansion System featuring AMD technology", lists 2 x AMD EPYC™ 7551 and 4 x AMD MI25. And if a lot of the purchases were from AMD, while AMD might somewhat wind down ZT's manufacturing part (as to not compete with clients of theirs), or sell it in parts, or such - then that might not fit well together.
    Reply
  • bit_user
    If AMD's bigger problems penetrating the AI and HPC space is lack of mindshare and market access, then buying an integrator like this should definitely help. Assuming AMD's offerings are competitive, adding them to this company's offerings drag along with it other players in the industry. If, after a while, AMD deems the problem sufficiently "solved", they can always spin out ZT on its own, again, and probably get at least most of what they paid.

    Another thing to consider is that, when your stock price is (potentially) overvalued, it's a wise move to spend some of it on companies with solid revenue to help provide a higher floor, if/when a downturn occurs.
    Reply
  • shady28
    Vertical integration.

    "Nobody's buying our AI stuff in data centers, so lets buy a system integrator and push it on the market that way."

    This would be sort of like Intel buying Dell.

    Not a fan.
    Reply
  • bit_user
    shady28 said:
    "Nobody's buying our AI stuff in data centers, so lets buy a system integrator and push it on the market that way."
    Nvidia plays dirty. We all know that. They recently tried to force Microsoft to use Nvidia's nonstandard rack form factor, to make it harder for them to replace their machines with anything non-Nvidia, in the future.
    https://www.tomshardware.com/tech-industry/artificial-intelligence/ai-titans-microsoft-and-nvidia-reportedly-had-a-standoff-over-use-of-microsofts-b200-ai-gpus-in-its-own-server-roomsWhen you're up against a competitor like that, you have to think outside the box and beat a path to customers' doors, if need be.

    Don't worry about Intel & Nvidia, though. I think there's no way AMD would lock them out of ZT Systems integrations. It would impact their revenues too severely.

    shady28 said:
    This would be sort of like Intel buying Dell.
    Actually, with Dell being such Intel stalwarts, it would be more like AMD buying Dell.
    Reply