AMD to acquire server builder ZT Systems for $4.9 billion in cash and stock

By Max A. Czerny

AMD said Monday it plans to acquire server maker ZT Systems for $4.9 billion, as the company seeks to expand its portfolio of artificial intelligence chips and devices and take on Nvidia.

AMD plans to pay 75% of the ZT Systems acquisition price in cash and the rest in stock. The company had $5.34 billion in cash and short-term investments as of the second quarter.

The computing demands of AI have forced tech companies to connect thousands of chips in clusters to achieve the necessary amount of data processing power. Connecting these massive numbers of chips means that the configuration of entire server systems has become even more important, which is why AMD acquired ZT Systems.

“AI systems are our number one strategic priority,” AMD CEO Lisa Su said in an interview with Reuters.

The addition of ZT Systems engineers will allow AMD to test and launch its latest GPUs faster at the scale of cloud computing giants like Microsoft, Su said.

“The main way ZT Systems adds to the company is that we sell more GPUs,” Su said.

AMD shares rose more than 2%, while Nvidia shares rose 1.4%.

“There’s no doubt that this gives them a much stronger connection to their data center customers, and because of that, (the acquisition) is a net positive for their long-term revenue strategy,” said Ben Bajarin, CEO of Creative Strategies.

AMD plans to spin off its server manufacturing and sales business once the deal closes, as it doesn’t plan to compete with companies like Super Micro Computer, Su said.

AMD has not held talks with potential buyers yet.

ZT Systems CEO Frank Zhang will join AMD and report to AMD’s President of Data Center, Forrest Norwood.

Closely held ZT Systems has about 2,500 employees, and AMD said it plans to retain about 1,000 of them, which would result in about $150 million in annual operating expenses.

ZT Systems currently generates annual revenues of approximately $10 billion, most of which comes from its manufacturing unit.

Executives expect the deal to close in the first half of 2025, and anticipate an additional 12 to 18 months to sell the manufacturing business.

AMD said it expects the deal to contribute to its adjusted financial performance by the end of 2025.

The slight decline in the deal value in the first year after it closes in 2025 will be offset by increased GPU sales, creating a breakeven effect for the deal, said CFO Jin Hu. In 2026, the acquisition will accelerate revenue growth, Hu added.

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“The sale of the manufacturing business (ZT Systems) will have no impact on AMD in the long run,” said Kenjay Chan, managing director of Summit Insights.

Chan added that the deal could help expand the company’s business in serving cloud computing customers. “Having more engineers helps,” he said.

The former chip designer now builds and sells entire data centers, or the individual components needed to build a data center, Nvidia CEO Jensen Huang said at the company’s developer conference in March. Analysts expect the company to generate $105.9 billion this year from its data center business, which includes chips and other AI hardware.

Su said last month that the company expects to generate about $4.5 billion in revenue from AI chips this year. The company’s customers include Microsoft and Meta Platforms.

(Reporting by Max A. Cherny in San Francisco and Arshia Bajwa in Bengaluru; Writing by Deborah Sophia in Bengaluru; Editing by Chris Reese and Tassim Zahid)