AMD Plans to Acquire ZT Systems to Challenge Nvidia’s AI Dominance
AMD Plans to Acquire ZT Systems to Challenge NVIDIA AI dominance
Advanced Micro Devices (AMD) announced on 19th August its plans to acquire server manufacturer ZT Systems in a cash-and-stock deal worth $4.9 billion, aiming to expand its portfolio of AI chips and hardware in an effort to compete with Nvidia.
This acquisition marks AMD’s largest since its $35 billion purchase of Xilinx in 2022. AMD CEO Lisa Su noted that the deal will bring in a team of top-tier engineers, enabling the company to advance both silicon and system development concurrently.
AMD intends to finance 75% of the $4.9 billion ZT Systems acquisition with cash and the rest with stock. By the second quarter, the company held $5.34 billion in cash and short-term investments.
With rising demand for AI computing, tech firms are connecting thousands of chips in clusters to meet data processing needs. This has made server system design more critical, driving AMD's decision to acquire ZT Systems.
The computing demands of AI have pushed tech companies to link thousands of chips in clusters to generate the required data processing power. This has made the design of entire server systems more critical, prompting AMD to acquire ZT Systems.
AMD’s acquisition of ZT Systems is anticipated to boost the adoption of its Instinct AI data center chips, which compete directly with NVIDIA's popular GPUs. ZT Systems, a private company with over 30 years of experience, focuses on creating custom computing infrastructure for AI hyperscalers.
While ZT Systems does not publicly reveal its client list, reports suggest its customers include major tech companies like Microsoft, Meta, and Amazon, all of which are deeply involved in AI development.
This acquisition is viewed as a strategic move to expedite the deployment of AMD’s AI infrastructure in data centers, addressing a significant demand from its clients.
The transaction, pending regulatory approval, is expected to close in the first half of 2025. Upon completion, New Jersey-based ZT Systems will be integrated into AMD’s data center business group. The deal's $4.9 billion valuation includes up to $400 million, contingent on the achievement of certain post-closing milestones. AMD has engaged Citi and Latham & Watkins as advisors, while ZT Systems is being advised by Goldman Sachs and Paul, Weiss.
Moreover, AMD intends to spin off its server manufacturing business and sell it after the ZT Systems deal is finalized, as the company has no intention of competing with firms like Super Micro Computer, according to CEO Lisa Su. AMD has not initiated discussions with potential buyers yet.
ZT Systems, a privately held company with around 2,500 employees, will see about 1,000 of its staff retained by AMD, leading to approximately $150 million in annual operating expenses.
Presently, ZT Systems generates around $10 billion in annual revenue, primarily from its manufacturing division.
After the acquisition is finalized, ZT Systems' CEO, Frank Zhang, is set to join AMD, where he will report to Forrest Norrod, the head of AMD's data center division. While ZT President Doug Huang will lead the design and customer enablement teams.
"We are excited to join AMD and, together, play an even larger role in designing the AI infrastructure that is shaping the future of computing," said ZT Systems CEO Frank Zhang.
The deal, expected to close in the first half of 2025, could start generating profits by the end of next year.
On 19th August, Following the announcement, AMD's stock rose 2% in pre-market trading.
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Sources:
1. AMD
2. Reuters
Advanced Micro Devices (AMD) announced on 19th August its plans to acquire server manufacturer ZT Systems in a cash-and-stock deal worth $4.9 billion, aiming to expand its portfolio of AI chips and hardware in an effort to compete with Nvidia.
This acquisition marks AMD’s largest since its $35 billion purchase of Xilinx in 2022. AMD CEO Lisa Su noted that the deal will bring in a team of top-tier engineers, enabling the company to advance both silicon and system development concurrently.
AMD intends to finance 75% of the $4.9 billion ZT Systems acquisition with cash and the rest with stock. By the second quarter, the company held $5.34 billion in cash and short-term investments.
With rising demand for AI computing, tech firms are connecting thousands of chips in clusters to meet data processing needs. This has made server system design more critical, driving AMD's decision to acquire ZT Systems.
The computing demands of AI have pushed tech companies to link thousands of chips in clusters to generate the required data processing power. This has made the design of entire server systems more critical, prompting AMD to acquire ZT Systems.
AMD’s acquisition of ZT Systems is anticipated to boost the adoption of its Instinct AI data center chips, which compete directly with NVIDIA's popular GPUs. ZT Systems, a private company with over 30 years of experience, focuses on creating custom computing infrastructure for AI hyperscalers.
While ZT Systems does not publicly reveal its client list, reports suggest its customers include major tech companies like Microsoft, Meta, and Amazon, all of which are deeply involved in AI development.
This acquisition is viewed as a strategic move to expedite the deployment of AMD’s AI infrastructure in data centers, addressing a significant demand from its clients.
The transaction, pending regulatory approval, is expected to close in the first half of 2025. Upon completion, New Jersey-based ZT Systems will be integrated into AMD’s data center business group. The deal's $4.9 billion valuation includes up to $400 million, contingent on the achievement of certain post-closing milestones. AMD has engaged Citi and Latham & Watkins as advisors, while ZT Systems is being advised by Goldman Sachs and Paul, Weiss.
Moreover, AMD intends to spin off its server manufacturing business and sell it after the ZT Systems deal is finalized, as the company has no intention of competing with firms like Super Micro Computer, according to CEO Lisa Su. AMD has not initiated discussions with potential buyers yet.
ZT Systems, a privately held company with around 2,500 employees, will see about 1,000 of its staff retained by AMD, leading to approximately $150 million in annual operating expenses.
Presently, ZT Systems generates around $10 billion in annual revenue, primarily from its manufacturing division.
After the acquisition is finalized, ZT Systems' CEO, Frank Zhang, is set to join AMD, where he will report to Forrest Norrod, the head of AMD's data center division. While ZT President Doug Huang will lead the design and customer enablement teams.
"We are excited to join AMD and, together, play an even larger role in designing the AI infrastructure that is shaping the future of computing," said ZT Systems CEO Frank Zhang.
The deal, expected to close in the first half of 2025, could start generating profits by the end of next year.
On 19th August, Following the announcement, AMD's stock rose 2% in pre-market trading.
Visit Us: https://graniteshares.com/institutional/uk/en-uk/
Capital at Risk | Sophisticated Investors Only
Sources:
1. AMD
2. Reuters
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