In an effort to compete with Nvidia (NVDA.O), opens new tab, AMD (AMD.O), opens new tab, announced on Monday that it would be purchasing server manufacturer ZT Systems for $4.9 billion.
AMD intends to use cash to cover 75% of the ZT Systems acquisition and stock for the remaining amount. As of the second quarter, the company’s cash and short-term investments totalled $5.34 billion.
Due to the computing requirements, tech companies have to connect thousands of chips in clusters to achieve the required processing power for AI. Because of the enormous number of chips that must be connected, the components that make up entire server systems are becoming increasingly crucial, which is why AMD is purchasing ZT.
Ben Bajarin, CEO of Creative Strategies, stated that “this undoubtedly gives them much stronger lock-in with their data centre customers, and because of that, (the acquisition) is a net positive for their long-term revenue strategy.
After the deal closes, AMD intends to sell its server manufacturing division because it does not intend to compete with firms like Super Micro Computer.
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