(Bloomberg) — Advanced Micro Devices Inc. has agreed to buy server maker ZT Systems in a cash and stock deal valued at $4.9 billion, adding data center technology that will bolster its efforts to acquire Nvidia Corp. to challenge.
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ZT Systems, based in Secaucus, New Jersey, will become part of AMD’s Data Center Solutions Business Group, according to a statement Monday. AMD will retain the company’s design and customer teams and attempt to sell the manufacturing division. The deal price includes a contingent payment of $400 million based on certain milestones.
AMD shares rose 2.5% in premarket trading Monday following the news.
ZT has extensive experience making server computers for large data center owners – the kind of customers investing billions in new artificial intelligence capabilities.
The acquisition will “significantly strengthen our data center AI systems,” AMD CEO Lisa Su said in the statement.
The company has set its sights on Nvidia, the runaway leader in the data center equipment market needed to support AI computing. AMD is adding software and hardware capabilities that better match the breadth of Nvidia’s offerings and accelerate adoption of its chips.
AMD is the second largest supplier of graphics processors that have become so essential for AI software development. And it has spent more than $1 billion in the past 12 months to expand its reach in that market. In July, the company agreed to buy Silo AI for $665 million to add an artificial intelligence model maker.
Santa Clara, California-based AMD is seen as Nvidia’s biggest rival in AI processors. The new MI range of accelerator chips will generate more than $4.5 billion in new revenue this year, the company expects. That puts it ahead of all of Nvidia’s other challengers, but still far behind. Analysts expect Nvidia to generate $100 billion in data center revenue this fiscal year.
Part of Nvidia’s expansion is fueled by its offering of chips, networks, servers, software and services, all aimed at bringing the use of AI more broadly into the economy. Under Su’s leadership, AMD is showing willingness to match that reach.
AMD shares rose less than 1% in New York trading on Friday, leaving the stock little changed through 2024. But profits in recent years have pushed its market value to $240 billion, more than double that of longtime rival Intel Corp.
(Updates with shares in the third paragraph.)
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