AMD plans to pay 75 percent of the ZT Systems acquisition in cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments in the second quarter.
The computing requirements for AI have dictated that tech companies must string thousands of chips together into clusters to achieve the necessary amount of power for data processing. Combining large numbers of chips has meant that putting together entire server systems has become increasingly important, which is why AMD is acquiring ZT Systems.
AMD shares rose nearly 3% in premarket trading.
“Artificial intelligence systems are our number one strategic priority,” AMD Chief Executive Lisa Su said in an interview with Reuters.
The addition of ZT Systems engineers will enable AMD to test and deploy products more quickly. its latest graphics processing units (GPUs) with artificial intelligence on the scale required by 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 plans to spin off its server manufacturing business and sell it once the deal closes as it has no plans to compete with companies like Super Micro Computer, Su said.
AMD has not yet held talks with potential buyers.
ZT Systems CEO Frank Zhang will join AMD and report directly to AMD data center chief Forrest Norrod.
ZT Systems, a closely held company, has about 2,500 employees, of which AMD plans to retain about 1,000 engineers. ZT Systems currently generates annual revenue of about $10 billion, Su said.
Executives expect the deal to close in the first half of 2025 and expect an additional 12 to 18 months to sell the manufacturing business.
Nvidia CEO Jensen Huang said at the company’s developer conference in March that the former chip designer now creates and sells entire data centers, or the individual components needed to build one. This year, analysts expect the company to generate $105.9 billion in its data center segment, which includes chips and other artificial intelligence hardware.
Su said last month that the company expects Raise approximately $4.5 billion in AI chip revenue This year, the company’s clients include Microsoft and Meta Platforms.
AMD expects ZT Systems to contribute to the company’s adjusted financial performance through the end of 2025.
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