Why Nvidia's main rival AMD is buying ZT Systems
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Lisa Su, chair and chief executive officer of AMD, during the Computex conference in Taipei, Taiwan, on June 3. Photo: Annabelle Chih/Bloomberg via Getty Images
Chip giant Advanced Micro Devices has agreed to buy ZT Systems, a designer and builder of server equipment, in a $4.9 billion cash and stock deal.
Why it matters: The acquisition, announced Monday morning, shows just how far ahead rival Nvidia is in AI tech infrastructure than everybody else.
Zoom in: After the deal closes, AMD will sell ZT Systems' U.S.-based data center infrastructure manufacturing and hold onto its system-design business.
- "They really just want the 1,000 design engineers. That's what this is," Stacy Rasgon, managing director and senior analyst at Bernstein Research, tells Axios in an interview.
Context: Artificial intelligence requires complex computing, and that's why businesses are looking to buy more than just chips, says Rasgon.
- Customers want whole systems of hardware, chips, networking and software designed for them, he said.
- AMD's bid now for ZT Systems is "a bit of an admission that they were weak here."
State of play: The fastest way, currently, to roll out an at-scale AI solution is to simply buy one from Nvidia, tech analyst Ben Thompson noted in Stratechery this morning.
- With ZT Systems, AMD can deliver customized solutions "much more quickly, helping it gain marketshare in the ongoing AI landgrab," Thompson wrote.
What they're saying: "The next major arc for AMD is AI," CEO Lisa Su said on an analyst call this morning.
- "We must have the capabilities and expertise to optimize solutions at the systems, rack and even the data center level."
- ZT's engineers will enable AMD to align "silicon and software road maps" to what large cloud companies need and speed up execution, she added.
The big picture: M&A's been a key part of AMD's strategy to narrow Nvidia's lead.
- Just last week, AMD completed a $665 million all-cash acquisition of Silo AI, an AI integration firm based in Finland.
- Over the past two years, it's also shelled out nearly $37 billion for Xilinx and Pensando Systems to boost chip offerings, networking and security.
What we're watching: Nvidia has started selling more software to AI developers and has even set up its own server rental business to defend against any slowing demand for its products, The Information has reported.
- Nvidia reports earnings next Wednesday.
