AMD investors welcomed the deal, sending shares up as much as 4.2 percent in New York on Monday. The transaction consists of 75 percent cash and 25 percent AMD common stock.
Privately held ZT has extensive experience building server computers for the owners of large data centers—the kind of customers that are investing billions of dollars in new artificial intelligence (AI) capabilities.
“AI is the most disruptive technology of the last 50 years and our No. 1 strategic priority,” AMD CEO Lisa Su said on a conference call with investors on Monday. She added that the acquisition of ZT will enable the company’s largest customers to deploy AMD’s AI infrastructure more quickly.
ZT engineers “understand the challenges associated with developing and managing high-performance, high-density systems at scale,” she said.
AMD is the second-largest supplier of graphics processors, which have become so important for developing AI software. And the company has spent more than $1 billion in the past 12 months to expand its reach in this market. In July, the company agreed to buy Silo AI for $665 million to add an artificial intelligence model maker to its portfolio.
ZT had revenue of about $10 billion over the past 12 months, almost entirely from manufacturing. AMD does not want to compete with customers such as Dell Technologies and HP Enterprise, so it will sell those manufacturing operations after the deal closes in the first half of next year. The chipmaker will retain about 1,000 engineers, Su said.
According to Bernstein Societe Generale Group, the computer manufacturer holds a 22 percent market share in servers based on graphics chips. The company said it secured the largest share in this segment through a partnership with OpenAI and Microsoft.
Monday’s deal could be seen as an admission by AMD that “compared to their larger competitor, they are lagging behind in the capabilities they need to succeed in the AI market,” Bernstein analyst Stacy Rasgon wrote in a report. “One could also argue that in this situation, it is better to make such a deal than not to make one.”
Santa Clara, California-based AMD is considered Nvidia’s biggest competitor in AI processors. The new MI line of accelerator chips will generate more than $4.5 billion in revenue this year, the company predicts. That puts it ahead of all of Nvidia’s other challengers, but still far behind. Analysts expect Nvidia to generate $100 billion in data center revenue this fiscal year.
Part of Nvidia’s expansion has been driven by offering chips, networks, servers, software and services, all aimed at further spreading the use of AI in the economy. Under Su’s leadership, AMD is showing it’s committed to achieving that reach.
AMD’s gains in recent years have pushed the company’s market value to well over $240 billion, more than double that of long-time rival Intel.
The company is looking for a “strategic partner” to buy ZT’s U.S.-based data center infrastructure manufacturing business. A deal for that segment is expected after the ZT acquisition closes in the first half of 2025.
“We believe ZT’s manufacturing business will be a very attractive asset to many players in the ecosystem due to the size of the business and its presence in the US and Europe,” Su said.
