Syed Imran Haider 
On Monday, AMD announced that it plans on spending $4.9 billion to acquire ZT Systems.
The company wants to battle Nvidia head on due to which it is aiming to expand its portfolio of artificial intelligence hardware and chips.
The Acquisition
According to AMD, 75% of the payment to acquire the server maker will be made in cash, while it will use stock for the remaining sum.
As of the second quarter, the company’s cash and short-term investments totaled $5.34 billion. The computing requirements associated with AI require tech companies to string together thousands of chips.
This allows them to manage the data crunching horsepower required. Since such a huge number of chips has to be strung together, entire server systems have to be created.
Therefore, AMD has decided to acquire ZT Systems. Lisa Su, the CEO of AMD, said that AI systems have become their top priority.
She said that AMD will have the opportunity to test and launch its AI graphics processing unit (GPU) at a faster pace when they add engineers from ZT Systems to the mix.
They would be able to match the scale of cloud computing heavyweights like Microsoft. Su said that ZT Systems would help AMD sell more GPUs.
Analysts
There was a more than 2% rise in shares of AMD, while Nvidia saw its share price go up by 1.4%. According to analysts, this acquisition is undoubtedly a positive one for AMD.
It would help them in catering to their data-center customers, which can have a positive impact on their long-term revenue strategy.
Once the deal is finalized, AMD is planning on breaking off and then selling its server manufacturing business.
According to the CEO, the company has no intentions of competing with companies like Super Micro Computer. However, they have yet to hold talks with potential buyers.
ZT Systems
Frank Zhang, the Chief Executive of ZT Systems, will also join AMD and will report to the data center chief Forrest Norrod.
The total number of employees at ZT Systems is 2,500. However, AMD will not retain them all. It plans on keeping about 1,000 employees.
This will lead to annualized operating expenses of about $150 million. Currently, ZT Systems annual revenue stands at $10 billion and its manufacturing unit contributes most of it.
According to executives, the deal between the two companies should be completed in the first half of next year.
As far as the manufacturing business is concerned, it will take them an additional 12 to 18 months to sell it off.
AMD added that it believes the deal will make a contribution to its financial performance by the end of next year.
Jean Hu, the CFO, said that once the deal closes next year, there will be a rise in sales of graphics processor units.
This would see the deal create a break-even effect. Hu added that revenue growth will rise due to the acquisition in 2026.
Analysts have said that in the long run, AMD will not suffer from any impact due to the sale of the manufacturing business.
