After the acquisition, the server manufacturing business will be sold.
To catch up with Nvidia, AMD is increasing its funding layout.
Acquiring ZT Systems for $4.9 billion in the US.
AMD announced on Monday that it plans to acquire server manufacturer ZT Systems for $4.9 billion to expand its AI chip and hardware product portfolio and compete with Nvidia.
This is AMD's largest acquisition since the $35 billion acquisition of Xilinx in 2022.
AMD plans to pay 75% of the ZT Systems acquisition price in cash, and the remaining portion in stocks.
ZT Systems is a leading ODM company in large-scale system design and GPU rack systems. The company builds custom computing infrastructure for Microsoft, Meta, Amazon, and others.
AMD CEO Lisa Su said that AI is the most transformative technology of the past 50 years and is also AMD's top strategic focus. The addition of ZT Systems engineers will enable AMD to test and launch the latest AI chips more quickly to meet the requirements of cloud computing giants like Microsoft.
She also said that the main contribution of ZT Systems to AMD is to help sell more GPUs.
Sell core business after acquisition.
After the acquisition is completed, AMD plans to spin off ZT Systems' server manufacturing business and sell it, as AMD has no plans to compete with companies like Super Micro Computer.
Currently, ZT Systems' annual revenue is about $10 billion, most of which comes from its manufacturing business.
After the acquisition, AMD plans to retain about 1,000 of ZT Systems' approximately 2,500 employees, which will generate approximately $150 million in annual operating costs.
Executives expect the deal to be completed in the first half of 2025 and anticipate an additional 12-18 months to sell the manufacturing business. The deal is expected to contribute to its adjusted financial performance by the end of 2025.
The deal also faces regulatory approval, with Su expecting regulatory review barriers to focus mainly on the US and Europe.
Fully pursue Nvidia.
In the AI chip field, Nvidia has always been the absolute leader, while AMD has always been in the industry's second place.
Previously, AMD expected that its new MI series accelerator chip would bring in more than $4.5 billion in new revenue this year.
Analysts expect Nvidia's data center revenue to reach $100 billion this fiscal year.
To expand its influence in the AI chip industry, AMD spent more than $1 billion in the past year.
In July of this year, AMD agreed to acquire Silo AI for $0.665 billion to add an AI model maker.
Regarding this trade, Cory Johnson, the Chief Marketing Strategist of Futurum Group, pointed out that Nvidia's system is "complete," and the company's business is far more than just chip sales. Acquiring ZT "brings AMD closer" to achieving this level, but there is still a considerable gap between the two that needs to be narrowed.
Johnson believes that a key benefit of this acquisition is the influx of engineering talent into AMD, which will give it an advantage in designing complete systems.