Remember when AMD’s market cap was down under $3B?
AMD (AMD.O), opens new tab said on Monday it plans to acquire server maker ZT Systems for $4.9 billion as the company seeks to expand its portfolio of artificial intelligence chips and hardware and battle Nvidia (NVDA.O), opens new tab.
AMD plans to pay for 75% of the ZT Systems acquisition with cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments as of the second quarter.
The computing requirements for AI have dictated that tech companies string together thousands of chips in clusters to achieve the necessary amount of data crunching horsepower. Stringing together the vast numbers of chips has meant the makeup of whole server systems has become increasingly important, which is why AMD is acquiring ZT Systems.
“AI systems are our number one strategic priority,” AMD CEO Lisa Su said in an interview with Reuters.
The addition of ZT Systems engineers will allow AMD to more quickly test and roll out its latest AI graphics processing units (GPUs) at the scale cloud computing giants such as Microsoft (MSFT.O), opens new tab require, Su said.
“The main way (ZT Systems) is additive to the company is we sell more GPUs,” Su said.
AMD’s shares rose more than 2%, while Nvidia rose 1.4%.
“No doubt this gives them much stronger lock-in with their data center customers, and because of that,(the acquisition) is a net positive for their long-term revenue strategy,” said Creative Strategies CEO Ben Bajarin.
AMD announced a deal Monday morning to acquire ZT Systems, which makes specialized servers and other rack-based gear designed to power artificial intelligence in data centers. But the company soon made clear it had no intention of competing directly in the service business itself, as it intends to sell ZT’s manufacturing business once it closes the deal sometime in the first half of next year.
The true aim of the deal – AMD CEO Lisa Su said on a call – is to bring in about 1,000 “world-class design engineers” to help the company provide a more robust suite of systems to customers. Archrival and AI powerhouse Nvidia already sells such systems that are effectively AI supercomputers.
The divestiture would mean AMD giving up on most of the $10 billion in annual revenue that ZT currently generates. But AMD thinks a more diverse product slate will ultimately boost its business even more. And it at least won’t be competing with its own customers like Dell and Super Micro, as both company’s buy AMD’s chips for the servers they sell. Super Micro’s share price slid more than 5% after Monday’s opening bell, but was down less than 1% by the close. Dell’s stock went from a 3% loss to a slight gain in the same period.
I would guess that while not being publicised generally AMD needs sofware engineers. Zen 5 seems to have teething issues and has been released “unfinished”.
Here is a shortish video from “Moore’s Law is Dead” that explains the problems https://www.youtube.com/watch?v=5Z1-FNBMw0w&t=1022s
The problems would seem to be fixable but embarrassing, and not as serious as Intel’s.
Yeah, that stung. I think Intel managed to force AMD’s hand on some of this, which hasn’t really happened in a while. I don’t know whether ZT Systems’ staff will free up some resources that can go back to covering urgent needs in other areas… one can hope.
Yes but looks like some of the issues are being solved via patches from Microsoft. It’s an embarrassment that has broken a long run of successful Zen launches. I’m still an AMD fan and would buy their kit again if my work warrants it, but it will probably be Zen 6 for the 128 cores (perhaps more by then).