Chipmaker Advanced Micro Devices (AMD) plans to buy ZT Systems, a computer hardware design company, for $4.9 billion in a bid to compete with strong rival Nvidia (NVDA), mostly in the field of artificial intelligence systems. Following this news, AMD shares rose.
AMD, based in Santa Clara, California, announced the purchase before the market opened on Monday. The company plans to close the deal in the first half of 2025. AMD is paying ZT Systems 75% in cash and 25% in stock. The acquisition will be accretive to adjusted earnings through the end of 2025, the company said.
Based in Secaucus, New Jersey, ZT Systems is one of the largest private providers of AI training and prediction infrastructure in the world, serving the largest cloud computing companies. The company earns more than 10 billion dollars a year. But AMD CEO Lisa Su told the Wall Street Journal that she intends to sell ZT's manufacturing business and keep only the system design business.
ZT Systems is a company specializing in the production of servers and related equipment for cloud and artificial intelligence data centers.
The acquisition is AMD's latest step toward becoming a more complete AI systems provider like its AI chip rival Nvidia. Last week, AMD completed the acquisition of Silo AI, Europe's largest private artificial intelligence laboratory, for $665 million.
AMD Shares Rise on Deal News
In the market today, AMD shares rose 4.5% to 155.28, while Nvidia shares rose 4.4% to 130.
"The acquisition of ZT Systems is an important next step in our long-term AI strategy to deliver advanced training and prediction solutions that can be deployed rapidly at scale to cloud and enterprise customers," Lisa Su said in the news release.
He added: "ZT adds world-class system design and rack-scale solutions expertise that will significantly strengthen our data center AI systems and customer support capabilities. This acquisition complements our investments to accelerate our AI hardware and software roadmaps." supports."
Impact on Profit Margin?
AMD stock analysts said the acquisition could put pressure on the company's profit margins.
"In our view, AMD's desire to enter the systems space is surprising given the typically lower margins," Wedbush Securities analyst Matt Bryson said in a client note.
However, if AMD focuses only on artificial intelligence systems with the acquisition, the reduction in profit margins may be limited, he said. Bryson rates AMD stock as "outperform" and has a price target of 200.
Jordan Klein, a trading desk analyst at Mizuho Securities, said AMD's acquisition of ZT confirms Nvidia's integrated strategy of selling self-sufficient off-the-shelf system hardware designs.
"AMD definitely needed this experience to keep up with Nvidia," Klein said in a client note. "This is where the cloud hyperscale market is headed."
