AMD acquires server manufacturer ZT Systems for $4.9 billion in cash and stock
AMD plans to pay 75 percent of the ZT Systems acquisition with cash and the rest with stock. The company had $5.34 billion in cash and short-term investments in the second quarter.
The computing power requirements for AI have required technology companies to connect thousands of chips together in clusters to achieve the required data processing power. By stringing together the huge number of chips, assembling entire server systems has become increasingly important, which is why AMD is acquiring ZT Systems.
“AI systems are our number one strategic priority,” AMD CEO Lisa Su said in an interview with Reuters.
“ZT Systems increases the value of the company primarily by selling more GPUs,” said Su.
AMD shares rose more than 2%, while Nvidia gained 1.4%.
“There’s no doubt that this gives them a much stronger connection to their data center customers, and for that reason (the acquisition) is a net gain for their long-term revenue strategy,” said Ben Bajarin, CEO of Creative Strategies.
AMD has not yet held talks with potential buyers.
ZT Systems CEO Frank Zhang will join AMD and report to AMD Data Center Director Forrest Norrod.
Privately held ZT Systems employs about 2,500 people, and AMD plans to retain about 1,000 of them, resulting in annual operating costs of about $150 million.
ZT Systems currently generates annual revenues of approximately $10 billion, most of which come from its manufacturing unit.
Executives expect the deal to close in the first half of 2025 and expect it to take an additional 12 to 18 months to sell the manufacturing business.
AMD expects the deal to be accretive to the company’s adjusted financial performance through the end of 2025.
CFO Jean Hu said the minor dilution from the deal in the first year after closing in 2025 will be offset by higher sales of graphics processing units, resulting in a break-even effect for the deal. In 2026, the acquisition will accelerate revenue growth, Hu added.
“The sale of the manufacturing business (ZT Systems) will have no impact on AMD in the long term,” said Kinngai Chan, managing director of Summit Insights.
Chan added that the deal could help expand business with cloud customers. “Having more engineers helps,” he said.
Nvidia CEO Jensen Huang said at the company’s developer conference in March that the one-time chip designer now designs and sells entire data centers or the individual components needed to build one. This year, analysts expect the company to generate $105.9 billion from its data center segment, which includes chips and other AI hardware.
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Reporting by Max A. Cherney in San Francisco and Arsheeya Bajwa in Bengaluru; additional reporting by Deborah Sophia in Bengaluru; editing by Chris Reese and Tasim Zahid
Our standards: The Thomson Reuters Trust Principles.
