AMD acquires ZT Systems for $4.9 billion to strengthen AI capabilities and data center market.

From Nasdaq: 2024-08-22 07:00:00

Advanced Micro Devices (NASDAQ: AMD) has agreed to acquire ZT Systems for $4.9 billion in cash and stock. This move is part of AMD’s strategy to advance its AI capabilities and better compete against Nvidia. ZT Systems designs and builds server, storage, and accelerator equipment, with big clients like Microsoft and Amazon. The deal includes around 1,000 ZTE engineers and aims to bolster AMD’s position in the data center market.

The acquisition of ZT Systems will help AMD become a data center end-to-end solution provider by expanding its offerings in the AI space. The deal is expected to close in the first half of next year, with plans to sell ZT Systems’ manufacturing business within 12 to 18 months. Nvidia, AMD’s rival in the AI market, has been diversifying its offerings to include pre-assembled server racks and networking equipment.

In addition to the ZT Systems acquisition, AMD has made smaller software acquisitions like Mipsology, Nod.Ai, and Silo AI. While AMD may not surpass Nvidia in the AI chip market, becoming a solid second option could lead to significant growth. AMD trades at a forward P/E ratio of around 28 based on 2025 estimates, making it an attractive investment opportunity in the AI data center space.

Investors may consider buying AMD stock given its prospects in the AI market. While the acquisition of ZT Systems is a positive development for AMD, Nvidia remains dominant in the AI chip space. The market is growing rapidly, offering room for multiple players to succeed. The Motley Fool Stock Advisor team believes AMD has strong potential for growth in the coming years, making it a stock worth considering.



Read more at Nasdaq: Should Investors Buy AMD as It Takes Aim at Nvidia With Its Latest Acquisition?