AMD Signs $4.9 Billion Deal to Challenge Nvidia's AI Infrastructure Leadership

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AMD has agreed to buy artificial intelligence infrastructure group ZT Systems in a $4.9 billion cash-and-stock deal, expanding the chip company’s AI investments as it seeks to challenge market leader Nvidia.

The California-based group said the acquisition will help accelerate adoption of its Instinct line of AI data center chips, which compete with Nvidia’s popular graphics processing units (GPUs).

ZT Systems, a private company founded three decades ago, is building custom computing infrastructure for the world’s largest “AI professionals.” While the company doesn’t disclose its clients, the companies with the largest scale include the likes of Microsoft, Meta, and Amazon.

The deal represents AMD’s largest acquisition since it bought Xilinx for $35 billion in 2022.

“It brings 1,000 world-class design engineers to our team, allows us to develop silicon and systems in parallel, and most importantly, get the latest AI infrastructure up and running in data centers as quickly as possible,” AMD CEO Lisa Su told the Financial Times.

“It really helps us deploy our technology much faster because that’s what our customers tell us.” [they need]“Su added,”

The deal is expected to close in the first half of 2025, subject to regulatory approval, after which New Jersey-based ZT Systems will be integrated into AMD’s data center business. The $4.9 billion valuation includes up to $400 million contingent on “certain post-closing milestones.”

Citi and Latham & Watkins are advising AMD, while ZT Systems has retained Goldman Sachs and Paul, Weiss.

The move comes as AMD seeks to break Nvidia’s stranglehold on the AI data center chip market, which earlier this year saw Nvidia temporarily become the world’s most valuable company as big tech companies pour billions of dollars into its chips to train and deploy powerful new AI models.

Part of Nvidia’s success stems from its “systems” approach to the AI chip market, offering a comprehensive computing infrastructure that includes pre-packaged server racks, networking equipment and software tools to make it easier for developers to build AI applications on its chips.

AMD’s acquisition shows the chipmaker is building out its “systems-of-intelligence” offerings. The company introduced its MI300 line of AI chips last year, and says it will launch its next-generation MI350 chip in 2025 to compete with Nvidia’s new Blackwell line of GPUs.

In May, Microsoft was one of the first AI companies to adopt MI300, integrating it into its Azure cloud platform to power AI models like OpenAI’s GPT-4. AMD’s quarterly chip revenue topped $1 billion for the first time in the three months through June 30.

But while AMD has hailed the MI300 as its fastest product ever, its data center revenue still represents a small fraction of the $22.6 billion that Nvidia’s data center business generated during the quarter ending in late April.

In March, ZT Systems announced a partnership with Nvidia to build a dedicated AI infrastructure using its Blackwell chips. “I think we definitely believe that ZT as part of AMD will greatly accelerate the adoption of AMD AI solutions, but we have customer commitments and we will certainly honor them,” Su said.

Su added that she expects regulators’ review of the deal to focus on the United States and Europe.

In addition to increasing its R&D spending, AMD says it has invested more than $1 billion over the past year to expand its AI hardware and software ecosystem.

In July, the company announced it had acquired Finnish AI startup Silo AI for $665 million, the largest acquisition of a privately held AI startup in Europe in a decade.