Chipmaker AMD Targets Nvidia's Data Center Dominance With $5B Deal
Chipmaker Advanced Micro Devices has agreed to acquire data center equipment-maker ZT Systems for close to $5B, part of an effort to replicate a strategy that has made Nvidia the dominant provider of artificial intelligence computing power to the world’s largest data center users.
In a cash and stock deal valued at $4.9B, AMD is set to acquire New Jersey-based ZT Systems, a designer and manufacturer of servers, server racks and other IT gear integral to supporting AI and cloud computing within data centers. AMD plans to sell off ZT’s manufacturing business while absorbing its systems design business once the deal closes early next year, The Wall Street Journal reports.
The deal is reportedly part of a broader effort by AMD to offer customers — particularly tech giants like Microsoft, Google and Meta that are driving the AI data center boom — not just high-performance processors but a broad suite of closely integrated IT equipment and supporting infrastructure that can be seamlessly integrated together into data centers.
Providing such integrated computing systems will allow the firm to more proactively assist Big Tech customers in designing and setting up data centers to support their AI ambitions, AMD CEO Lisa Su told the WSJ.
“What it allows me to say to them is let me help you build your next training cluster, and tell me what’s important to you,” Su said. “I now have a very large design team that can help you do that.”
In doing so, AMD is attempting to eat into rival Nvidia’s dominant share of the exploding market for AI computing power by imitating one of its most successful strategies.
Nvidia’s rapid rise to become a leading player in the AI arms race was buoyed by the fact that it doesn’t just sell chips — it sells computing systems of servers, networking infrastructure and other equipment designed around those chips. Nvidia also works closely with the world’s largest tech companies to ensure they are building and designing data centers optimized to support that equipment years before the first units are shipped.
Su told the WSJ that the acquisition of ZT will allow AMD to pursue a similar strategy to the tech giants leading the AI demand boom as it attempts to build on its existing foothold in the AI data center space. The firm’s AI chip business has seen better-than-expected growth this year, with revenue for 2024 projected to be a billion dollars above expectations at $4.5B. Still, the firm lags far behind industry leader Nvidia, which raked in $22.6B in data center chip sales in the first quarter of this year alone.
