Advanced Micro Devices (AMD) (NASDAQ:AMD) is looking to further enhance its artificial intelligence (AI) infrastructure with the acquisition of AI service provider ZT Systems for US$4.9 billion.
Announced on Monday (August 19), the definitive agreement is AMD’s latest move to reinforce its position in the data center market. In the last year it has spent over US$1 billion to enhance its AI ecosystem and software capabilities as it seeks to better compete with AI powerhouse NVIDIA (NASDAQ:NVDA), which offers more complete AI systems.
The deal, set to be completed in the first half of 2025, will be financed with 75 percent cash and 25 percent stock.
AMD expects the purchase to be accretive to its non-GAAP earnings by the end of next year. Reuters quotes CFO Jean Hu as saying that the acquisition is seen enhancing the company’s revenue growth starting in 2026.
ZT Systems is known for its expertise in designing and deploying large-scale data center infrastructure. The company’s systems are used by major hyperscale computing providers, making it a key player in the data center industry.
As mentioned, the acquisition aligns with AMD’s strategy of expanding its AI hardware and infrastructure offerings, which are critical for handling the increasing demands of AI applications and cloud computing.
AMD’s CEO, Lisa Su, highlighted the strategic importance of the acquisition, stating that ZT Systems’ capabilities will accelerate the deployment of AMD’s AI graphics processing units at scale.
‘Combining our high-performance Instinct AI accelerator, EPYC CPU, and networking product portfolios with ZT Systems’ industry-leading data center systems expertise will enable AMD to deliver end-to-end data center AI infrastructure at scale with our ecosystem of OEM and ODM partners,’ she added in the company’s press release.
As part of the transaction, AMD plans to divest ZT Systems’ manufacturing business and will seek a strategic partner to acquire this segment. However, the acquisition will retain around 1,000 of ZT Systems’ 2,500 employees.
ZT Systems’ CEO, Frank Zhang, will join AMD and oversee the integration of the company’s design and customer enablement teams within AMD’s Data Center Solutions Business Group.
Shareholders reacted positively to the news, with AMD’s share price ending Monday up 12.46 percent.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.