AMD acquires hyperscale solution provider ZT Systems

Acquiring companies with specialized expertise allows tech giants, like Advanced Micro Devices (AMD), to enter new markets or expand their presence in existing ones. That is exactly what happened this week when AMD announced plans to buy hyperscale server maker ZT Systems for a whopping $4.9 billion. The main goal of the latest acquisition is to add data center technology that will bolster its efforts to challenge AI chipmaker Nvidia.

Image credit: Athena Sandrini/pexels.com

According to a released statement by AMD, ZT Systems will be joining AMD's Data Center Solutions Business Group. AMD plans to retain the company's system design capabilities and sell ZT's manufacturing assets. The deal, which is subject to government regulatory approvals, is expected to close in the first half of 2025. 

Frank Zhang, ZT Systems CEO and founder, will be leading the manufacturing business, while ZT President Doug Huang will lead the design division. Huang will be reporting to Forrest Norrod, the current head of AMD’s Data Center Solutions Business Group.

Based in Secaucus, New Jersey, ZT Systems has extensive experience providing server computers for leading cloud computing providers like Amazon Web Services and Microsoft Azure. AMD is buying the New Jersey server provider to better match the breadth of Nvidia’s offerings and speed up the uptake of its AMD's AI chips. AMD currently waging a brutal war with Nvidia in the hotly competitive GPU AI market.

Santa Clara, California-based AMD is the second-biggest provider of graphics processors and is seen as Nvidia's closest rival in the AI chipmaking space. AMD has already spent more than $1 billion in the last 12 months to build its AI business and boost its presence in that market. In July, the company has acquired AI tech specialist Silo AI for $665 million to boost its AI portfolio. The US chipmaker has seen sales of its Epyc CPU line eat into rival Intel's market share but has failed to match Nvidia's success in the GPU AI space. AMD hopes that its latest breed of MI range of accelerator chips will begin to whittle away at that GPU market. The new chips are expected to bring over $4.5 billion in sales this year.

M&A will remain a critical strategy for big tech companies looking to stay competitive in an increasingly digital world. Acquisitions of specialized companies, like ZT Systems, could become more common as tech giants race to build AI tech portfolios to better compete with the market. Expect more M&A activities in the coming months.