AMD Aims for More Leverage Against Nvidia With ZT Systems Buy
The AI wars just got hotter. AMD is buying ZT Systems, aiming to bulk up its AI capabilities for cloud computing providers as well as for enterprises. The move puts rival Nvidia on notice.
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AMD is buying ZT Systems in a move the chipmaker hopes will give it greater leverage against rival Nvidia.
AMD, which sells through the channel, is buying ZT Systems 4.9 billion in cash and stock, along with a payment of up to $400 million based on certain milestones to be met after closing. The chipmaker’s rationale is to strengthen its AI capabilities for cloud computing vendors and for enterprises. Competitor Nvidia cemented countless similar partnerships with hyperscalers and smaller cloud providers as demand for AI has skyrocketed.
To combat that momentum, AMD is looking to ZT Systems, which delivers AI data center and storage infrastructure to cloud providers throughout the world. AMD has spent more than $1 billion in the past year to develop its AI software and ecosystem, the company said in a press release.
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AMD's Lisa Su
“Our acquisition of ZT Systems is the next major step in our long-term AI strategy to deliver leadership training and inferencing solutions that can be rapidly deployed at scale across cloud and enterprise customers,” said Lisa Su, chairwoman and CEO of AMD. “ZT adds …systems design and rack-scale solutions expertise that will significantly strengthen our data center AI systems and customer-enablement capabilities.”
Once the acquisition closes, ZT Systems will join the AMD Data Center Solutions Business Group. Frank Zhang, CEO of ZT Systems, will lead the manufacturing group and Doug Huang, president of ZT Systems, will oversee the design and customer enablement teams. Both will report to Forrest Norrod, executive vice president and general manager of AMD. In addition, AMD plans to sell ZT Systems’ server manufacturing unit, likely to avoid probes from the Biden Administration, which has scrutinized a number of tech M&A transactions.
ZT Systems is based in Secaucus, New Jersey. It has delivered AI compute and storage infrastructure for more than 15 years. AMD is headquartered in Santa Clara, California.
“We are excited to join AMD and together play an even larger role designing the AI infrastructure that is defining the future of computing,” Zhang said. “AMD shares our vision for the important role our technology and our people play [in] designing and building the computing infrastructure powering the largest data centers in the world.”
The AMD board of directors has unanimously approved the purchase of ZT Systems. The companies expect the acquisition to close in the first half of 2025.
Cloud and AI: Mutually Dependent Technologies
The AMD-ZT Systems announcement comes on the very day that IDC says outlay on AI initiatives is soaring. And those investments are nearly impossible without the reach, capacity and scalability of cloud computing.
Thus, by 2028, worldwide spending on AI will more than double, reaching $632 billion, the research firm says.
"AI-powered transformations have delivered tangible business outcomes and value for organizations worldwide and they are building their AI strategies around employee experience, customer engagement, business process and industry innovations," said Ritu Jyoti, group vice president and general manager, AI and Data Research at IDC. "With rampant innovations in trusted AI tools and technologies and improved harmonization of human and machines interplay, barriers to AI adoption at scale will continue to diminish.”
The spending won’t just center on generative AI, either. Rather, within five years, focus on AI will have gone beyond this essential, yet basic, aspect of the technology, IDC predicts. Even so, that won’t deter generative AI investments. Spending on this category will reach $202 billion by 2028, a compound annual growth rate of 59.2%.
Meanwhile, amount of money going into AI hardware, including for cloud infrastructure as a service, will grow significantly as well, IDC said, though it did not provide figures.
AMD’s strategy with ZT Systems in hand could pay off, giving it more heft in cloud computing and AI. It likely needs such inorganic heft to better compete with behemoth Nvidia, whose market share it trails; many analyst firms peg Nvidia as leading with around 88%, AMD around 12% and Intel around 4%. Despite Nvidia’s advantages, smaller companies often have more agility to innovate quickly compared to their more bureaucracy-entrenched counterparts.
Wall Street seems optimistic about the AMD-ZT Systems pairing. Shares of AMD were trading a little more than 3% higher, past the $153 mark, by the time of publication.
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