Dive Brief:
- Advanced Micro Devices will acquire server manufacturer ZT Systems for $4.9 billion as the chipmaker looks to expand its artificial intelligence capabilities.
- The cash and stock transaction is part of AMD's strategy to scale AI training and inferencing solutions that can produce insights based on model data, leveraging ZT Systems' cloud computing design services.
- The deal is expected to close by the end of next year, after which AMD plans to sell ZT Systems' U.S.-based data center infrastructure manufacturing business.
Dive Insight:
AMD aims to better compete against AI chip powerhouse Nvidia through a variety of operational and M&A investments, which will grow its AI hardware and software capabilities.
AMD increased its operational expenses by 15% year over year last quarter, up to $1.8 billion, to invest in AI-related research and development, EVP, CFO and Treasurer Jean Hu said on a July 30 Q2 earnings call.
"The rapid advances in generative AI and development of more capable models are driving demand for more compute across all markets," CEO Lisa Su told investors on the call.
The company is pushing advancements in hardware, software and solutions investments to capitalize on growth opportunities, Su added.
Headquartered in New Jersey, ZT Systems manufactures servers, as well as data center and storage infrastructure, expertise AMD will leverage as it grows its cloud computing and enterprise solutions offerings.
The ZT Systems acquisition comes days after AMD closed on its deal to acquire Finland-based AI startup Silo AI for $665 million, another arm of the company's competitive strategy.
AMD counts Meta, Microsoft and Google among its AI solutions customers, and is pushing to offer them a wider range of products that can rival Nvidia.
Nvidia has been the main character thus far in the AI-boom storyline, with revenues skyrocketing 262% in the first quarter and plans for a bounty of new AI-powered processing chips.
Now, AMD is looking to take some of the spotlight. Its revenue was up 9% YoY in Q2 to $5.8 billion. Data center revenue in particular more than doubled YoY to $2.8 billion, driven by an increase in the company's Instinct GPU data center processors.
"Overall we remain quite bullish on the overall AI market," Su said on the call. "I think the market continues to need more compute. And we also feel very good that our hardware and software solutions are getting good traction, and we are continuing to expand that pipeline.”
