AMD advances AI play with $4.9B takeover of ZT Systems

Semiconductor company Advanced Micro Devices (AMD) plans to acquire server manufacturer ZT Systems for $4.9 billion – a move that could boost its challenge to competitor Nvidia in the AI space, according to The Wall Street Journal (WSJ). ZT Systems also develops data center equipment to support cloud and AI.

After Nvidia, "AMD is the second-biggest provider of the graphics processors that have become so vital to developing AI software," reported Bloomberg. AMD has invested over $1 billion in the last 12 months to further develop its AI technology. 

AI is AMD's "no. 1 strategic priority," said the company's CEO Lisa Su in a call with investors on Monday. Last month, AMD announced plans to purchase AI lab Silo AI for $665 million.

The acquisition of ZT Systems could also boost AMD's rivalry with Intel.

"For some time, [Intel] has been losing market share to AMD, a rival that bases its chip designs on the same x86 architecture used by Intel," reported Light Reading's Iain Morris. Intel announced a workforce reduction of 15% earlier this month, which could amount to a loss of over 18,000 jobs.

Plans to sell hardware business

While ZT Systems brought in $10 billion in revenue over the past year, AMD plans to sell ZT's manufacturing business after the acquisition to avoid competing with its own customers, which include Dell and Super Micro, said WSJ. Both companies purchase AMD chips to sell in their own products.

Related:AMD closes Xilinx acquisition

WSJ's Dan Gallagher dubbed the acquisition an "acqui-hire" due to the 1,000 engineers AMD will be bringing on. "It will also ultimately spare AMD a hit to its bottom line as the hardware business offers thinner profit margins—especially in the brutally competitive AI market," he explained.

The server and storage component market experienced record growth in Q1 of this year, growing 152%, according to research firm Dell'Oro Group. Analysts said strong growth for accelerators is expected to continue this year.

"GPUs will remain the primary choice for training and inference, with NVIDIA's upcoming Blackwell platform strengthening the firm's leadership," according to Dell'Oro. "We also anticipate that custom accelerators and other vendors will gain some share with competitive offerings such as the AMD MI300X/MI325X Instinct and Intel Gaudi3."

This is reportedly AMD's second biggest acquisition since purchasing chipmaker Xilinx for $35 billion in 2020. AMD's stock was up 2.5% as of Monday afternoon.