Silicon giant AMD has signed a deal to acquire ZT Systems for about $4.9 billion in cash and stock, adding a massive AI systems maker to its arsenal as rival Nvidia's AI business booms.
This is a big deal, not only because it's worth nearly $5 billion, but also because it will have a significant impact on AMD's business, both at the enterprise and consumer levels.
“ZT Systems' main contribution to the company is to sell more GPUs.”
Dr. Lisa Su, CEO of AMD
While ZT Systems is best known for providing cloud server hardware to companies like Microsoft, AMD isn't buying the company just to bolster its data center business. According to AMD CEO Dr. Lisa Su, the acquisition of ZT Systems is also aimed at accelerating GPU development and selling more GPUs to its customers.
“ZT Systems' main contribution to the company is to sell more GPUs,” AMD CEO Dr. Lisa Su (pictured) told Reuters in an interview about the deal.
As graphics cards and the processors that drive them become essential to powering PC racks that, in turn, power modern AI services, AMD is clearly eager to improve its ability to develop and ship AI-optimized chips.
That includes everything from the new Ryzen AI 300 Copilot+ PC processors we saw at Computex 2024 to the AMD Instinct MI300 accelerators the company sells to AI companies. AMD counts companies like Meta and Microsoft among its customers for its systems, and the company’s CEO, Dr. Su, told Reuters that “AI systems are our number one strategic priority.”
According to a conference call with investors to discuss the deal, AMD will add about 1,000 engineers and 1,500 manufacturing employees to its workforce as part of the acquisition. These teams will work in parallel with AMD's existing engineers to develop AI-optimized chips and systems faster and more efficiently.
“This will accelerate AMD’s development at scale,” Dr. Su said in response to a question. “It’s CPUs, GPUs, networking systems, clusters, how do we make sure they have the right reliability. This team will help us do that because they’ve done it, they’ve done it at scale.”
However, AMD plans to spin off and sell at least a significant portion of ZT Systems' data center manufacturing business.
In conclusion
This deal likely won't impact the average AMD user anytime soon, as it's not expected to close until 2025. But it's a huge moment in the AI arms race between companies like AMD, Intel, and Nvidia, because it shows us exactly how much they value AI and cloud companies as customers.
By acquiring ZT Systems, AMD has gained a systems supplier to companies like Microsoft, and will put its teams to work alongside those joining ZT to accelerate its chip development across the company and improve the services it offers to customers who need complex servers and systems.
This is all well and good because AI technology continues to advance at a rapid pace. We can now create realistic AI videos in seconds and generate voices for AI characters, but while it may seem like we’re inventing these tricks out of thin air, they actually require a lot of computing power on a remote server somewhere — and AMD just made a $5 billion bet that these servers will be in high demand in the coming years.
And while people wondering whether to buy AMD or Nvidia for their next gaming PC GPU upgrade might not need to worry about this deal right away, who knows, we could see some of the benefits of this deal trickle down to AMD's consumer GPU business in the years to come.