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AMD has agreed to purchase AI infrastructure group ZT Systems in a cash-and-stock deal valued at $4.9 billion, continuing its string of AI investments because the chipmaker seeks to compete with market leader Nvidia.
The California-based company said the acquisition will help speed up the launch of its Instinct line of AI data center chips that compete with Nvidia's popular graphics processing units (GPUs).
ZT Systems, a privately held company founded three a long time ago, builds custom computing infrastructure for the biggest AI hyperscalers. The company doesn’t name its customers, however the hyperscalers include Microsoft, Meta and Amazon, amongst others.
The deal is AMD's largest acquisition since buying Xilinx for $35 billion in 2022.
“This will bring a thousand world-class designers onto our team, enable us to develop silicon and systems in parallel, and most significantly, get the most recent AI infrastructure up and running in data centers as quickly as possible,” AMD CEO Lisa Su told the Financial Times.
“It really helps us deploy our technology much faster because our customers tell us that’s exactly what they need,” Su added.
The transaction is anticipated to shut in the primary half of 2025, subject to regulatory approval, after which New Jersey-based ZT Systems will probably be integrated into AMD's data center business group. The $4.9 billion valuation includes as much as $400 million contingent on “certain post-closing milestones.”
Citi and Latham & Watkins are advising AMD, while ZT Systems has engaged Goldman Sachs and Paul, Weiss.
The move comes as AMD tries to interrupt Nvidia's stranglehold on the AI data center chip market. Earlier this 12 months, Nvidia had temporarily turn out to be the world's most useful company as major technology corporations poured billions of dollars into its chips to coach and deploy powerful recent AI models.
Part of Nvidia's success comes from its “systems” approach to the AI chip market: The company offers an end-to-end computing infrastructure that features pre-built server racks, networking equipment and software tools to make it easier for developers to construct AI applications on the corporate's chips.
The acquisition by AMD shows that the chipmaker is expanding its own “system” offering. The company launched its MI300 series of AI chips last 12 months and says it is going to launch its next-generation MI350 chip in 2025 to compete with Nvidia's recent Blackwell series of GPUs.
In May, Microsoft became one in every of the primary AI hyperscalers to introduce the MI300, constructing it into its Azure cloud platform to run AI models akin to OpenAI's GPT-4. AMD's quarterly revenue for the chips exceeded $1 billion for the primary time within the three months ended June 30.
But although AMD is celebrating the MI300 as its company's fastest-developed product line ever, revenue from the information center business was only a fraction of the $22.6 billion that Nvidia's data center business brought in within the quarter ending April.
In March, ZT Systems announced a partnership with Nvidia to construct a customized AI infrastructure using the corporate's Blackwell chips. “I believe we’re confident that ZT as a part of AMD will significantly speed up the adoption of AMD AI solutions,” Su said, but “we have now commitments to our customers and we will certainly honor them.”
Su added that she expects regulators' review of the deal to deal with the U.S. and Europe.
In addition to increasing its research and development spending, AMD says it invested greater than $1 billion last 12 months to expand its AI hardware and software ecosystem.
In July, the corporate announced that it might acquire Finnish AI startup Silo AI for $665 million, making it the biggest acquisition of a personal AI startup in Europe in a decade.
