AMD to acquire server maker ZT Systems in $4.9 billion deal

(Bloomberg) — Advanced Micro Devices Inc . agreed to buy server maker ZT Systems in a cash and stock deal valued at $4.9 billion, adding data center technology that will bolster its efforts to challenge Nvidia Corp.

Bloomberg’s most read

Secaucus, New Jersey-based ZT Systems will become part of AMD’s Data Center Solutions Business Group, according to a statement Monday. AMD will retain the company’s design and customer teams and look to sell the manufacturing division. The transaction price includes a contingent payment of $400 million based on certain milestones.

AMD shares rose 2.5 percent in premarket trading Monday after the news.

Closely held ZT has extensive experience making server computers for owners of large data centers — the kind of customers who are investing billions in new AI capabilities.

The acquisition will “significantly strengthen our data center artificial intelligence systems,” AMD Chief Executive Lisa Su said in the statement.

The company is setting its sights on Nvidia, the runaway market leader for the data center equipment needed to support AI computing. AMD is adding software and hardware capabilities that will better match the breadth of Nvidia’s offerings and accelerate the uptake of its chips.

AMD is the second largest supplier of GPUs that have become so vital to the development of AI software. And it has spent more than $1 billion in the past 12 months to expand its reach in that market. In July, the company agreed to buy Silo AI for $665 million to add an artificial intelligence model maker.

Santa Clara, California-based AMD is seen as Nvidia’s closest rival when it comes to AI processors. Its new MI lineup of accelerator chips will bring in more than $4.5 billion in new revenue this year, the company estimated. That puts it ahead of all of Nvidia’s other competitors, but still far behind. Analysts expect Nvidia to generate $100 billion in data center revenue this fiscal year.

Part of Nvidia’s expansion has been fueled by offering chips, networks, servers, software and services, all aimed at making the use of AI more widespread in the economy. Under Su’s leadership, AMD is demonstrating a commitment to match that coverage.

AMD shares rose less than 1 percent in New York trading on Friday, leaving shares little changed in 2024. But gains in recent years have pushed its market value to $240 billion, more than twice that of rival long-standing Intel Corp.

The story continues

(Updates with actions in the third paragraph.)

Bloomberg Businessweek’s most read

©2024 Bloomberg LP