Advanced Micro Devices (AMD) has announced its intention to acquire server manufacturer ZT Systems in a $4.9 billion cash-and-stock deal. This strategic move aims to enhance AMD’s presence in the artificial intelligence (AI) sector, particularly in data center technologies, to better compete with Nvidia. ZT Systems, based in Secaucus, New Jersey, specializes in creating and implementing data center and storage infrastructure systems for cloud service providers.

The acquisition includes a contingent payment of up to $400 million based on specific performance milestones. Upon completion, ZT Systems will integrate into AMD’s Data Center Solutions Business Group, with Frank Zhang, ZT Systems’ CEO, leading the manufacturing business and Doug Huang leading the design and customer enablement teams. AMD plans to retain the design and customer service teams while divesting its server manufacturing segment.

This acquisition is part of AMD’s broader strategy to expand its AI capabilities and hardware offerings. AMD has been investing heavily in AI-related technologies, including the recent acquisition of Silo AI for $665 million. The company aims to augment its software and hardware portfolios to rival Nvidia’s extensive product range and accelerate the adoption of its own chips.

AMD’s CEO, Lisa Su, emphasized that the acquisition will significantly enhance the company’s data center AI systems. The deal is expected to finalize in the first half of 2025, with an additional 12 to 18 months expected to sell off the manufacturing division. This strategic move underscores AMD’s determination to match Nvidia’s expansive reach in the AI processor arena, positioning itself as a formidable competitor in the market for data center hardware essential for AI computing.