As per reports, AMD is planning to acquire server maker ZT Systems for $4.9 billion as the company seeks to expand its portfolio of artificial intelligence chips and hardware and battle Nvidia.

AMD plans to pay 75 percent of the ZT Systems acquisition in cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments as of Q2.

Computing requirements for AI are dictating that tech companies put thousands of chips together in clusters to achieve the necessary amount of data processing power. Stringing together vast numbers of chips means that the configuration of entire server systems is becoming increasingly important, which is why AMD is acquiring ZT Systems.

"AI systems are our number one strategic priority," AMD CEO Lisa Su says.

“The addition of ZT Systems engineers will allow AMD to more quickly test and roll out its latest AI graphics processing units (GPUs) at the scale cloud computing giants such as Microsoft require,” adds Lisa.

"No doubt this gives them much stronger lock-in with their data center customers, and because of that,(the acquisition) is a net positive for their long-term revenue strategy," says Creative Strategies CEO Ben Bajarin.

“AMD plans to break off its server manufacturing business and sell it once the deal closes, as it has no plans to compete with companies such as Super Micro Computer,” adds Lisa.

CFO Jean Hu says, “The minor dilution from the deal in the first year after closing in 2025 would be offset by greater sales of graphics processor units, creating a break-even effect for the deal. In 2026, the acquisition will accelerate revenue growth.”