AMD has taken a decisive step to solidify its position in the AI and data center markets by acquiring ZT Systems, a hyperscale server maker, for $4.9 billion. This move aligns with AMD’s broader strategy to enhance its AI capabilities and challenge industry giants like Nvidia. The deal should close in the first half of 2025, pending regulatory approval.

After completing the acquisition, AMD plans to spin off ZT Systems’ manufacturing assets. Instead, AMD will leverage ZT’s strengths in systems design and customer support. ZT Systems, known for designing and deploying servers for major tech companies like Amazon Web Services and Microsoft Azure, will help AMD expand its influence in the data center market, especially in AI infrastructure.

The acquisition will also lead to leadership changes at ZT Systems. Frank Zhang, ZT’s CEO and founder, will continue leading the manufacturing business after the spinout. Meanwhile, Doug Huang, the current president, will oversee design and customer enablement. He will report directly to Forrest Norrod, head of AMD’s Data Center Solutions Business Group. This leadership restructuring intends to ensure a smooth transition and foster ongoing innovation.

AMD’s acquisition of ZT Systems comes as the company intensifies its efforts to capture a larger share of the AI market. Although AMD has made significant progress in the CPU market with its Epyc line, it has struggled to compete with Nvidia in the GPU space, particularly in AI applications. Nvidia remains the dominant player, with its valuation soaring to multi-trillions.

However, AMD is optimistic that combining its Instinct GPUs with ZT Systems’ data center expertise will help close the gap with Nvidia. AMD CEO Dr. Lisa Su emphasized the acquisition’s importance, stating, “By merging our high-performance Instinct AI accelerator, Epyc CPU, and networking products with ZT Systems’ industry-leading data center systems expertise, AMD will deliver end-to-end AI infrastructure at scale with our ecosystem of OEM and ODM partners.”

The $4.9 billion deal will be funded through a mix of cash (75 percent) and stock (25 percent). Looking ahead, AMD projects that the AI accelerator market could reach $400 billion by 2027. With this acquisition, AMD aims to compete aggressively and potentially lead in the rapidly evolving AI landscape.