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AMD has agreed to buy artificial intelligence infrastructure group ZT Systems in a $4.9 billion cash-and-stock deal, expanding a string of AI investments by the chip company as it aims to challenge market leader Nvidia.
The California-based group said the acquisition would accelerate adoption of its Instinct series of AI data center chips, which compete with Nvidia's popular graphics processing units.
ZT Systems, a private company founded 30 years ago, builds custom computing infrastructure for the largest AI “hyperscalers,” which don't disclose their clients, but include Microsoft, Meta, and Amazon.
This would be AMD's largest acquisition since it bought Xilinx for $35 billion in 2022.
“This will add 1,000 world-class design engineers to our team, enabling us to develop silicon and systems in parallel, and most importantly, to get modern AI infrastructure up and running in data centers as soon as possible,” AMD Chief Executive Lisa Su told the Financial Times.
“This really helps them adopt our technology more quickly because that's what customers are asking for,” Su added.
The deal, which is subject to regulatory approvals, is expected to close in the first half of 2025, after which New Jersey-based ZT Systems will be integrated into AMD's data center business group. The $4.9 billion valuation includes up to $400 million contingent on “certain post-closing milestones.”
Citi and Latham & Watkins are advising AMD, while ZT Systems has retained Goldman Sachs and Paul, Weiss.
The move comes as AMD seeks to break up Nvidia's dominance in the AI data center chip market, having briefly become the world's most valuable company earlier this year as big tech companies poured billions of dollars into the company's chips to train and deploy powerful new AI models.
Nvidia's success is due in part to its “systems” approach to the AI chip market, offering end-to-end computing infrastructure including pre-packaged server racks, networking equipment and software tools to make it easy for developers to build AI applications on the company's chips.
AMD's acquisition of ZT Systems shows that the company is building its own “systems” products. The company announced its MI300 series of AI chips last year and says it will launch its next-generation MI350 chips next year to take on Nvidia's new Blackwell series GPUs.
Microsoft in May became one of the first AI hyperscalers to adopt the MI300, incorporating it into its Azure cloud platform to run AI models such as OpenAI's GPT-4. AMD's quarterly revenue from the chip surpassed $1 billion for the first time in the three months ended June 30.
But while AMD is touting the MI300 as its fastest product launch ever, its data center revenue is still a fraction of the $22.6 billion that Nvidia's data center business made in the quarter ended April.
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In March, ZT Systems announced a partnership with Nvidia to build custom AI infrastructure using the company's Blackwell chips. “We believe that ZT, now part of AMD, will significantly accelerate the adoption of AMD AI solutions,” Su said, but added that “we will keep our promises to our customers.”
Su added that he expects regulatory review of the deal will focus on the United States and Europe.
In addition to increasing research and development spending, AMD says it has invested more than $1 billion over the past year to expand its AI hardware and software ecosystem.
In July, the company announced it would acquire Finnish AI startup Silo AI for $665 million, marking the largest acquisition of a privately held European AI startup in a decade.
