AMD Acquires ZT Systems for $4.9 Billion: What It Means for Investors
Deutsche Bank maintains a Hold rating on Advanced Micro Devices, Inc. (NASDAQ: AMD) with a price target of $150.00 after the company's announcement of acquiring server systems provider ZT Systems. This strategic move, valued at $4.9 billion, aims to enhance AMD's server and AI data center capabilities by securing 1,000 systems design engineers.
The deal includes a mix of 75% cash and 25% stock, with a $400 million contingent payment. AMD plans to sell off ZT's manufacturing business, which currently contributes to the majority of its revenue, within 12 to 18 months post-acquisition. This acquisition is expected to be earnings accretive post-2025 and is set to close in the first half of 2025.
Deutsche Bank sees this move as crucial for AMD to better compete with NVIDIA in servicing cloud customer AI needs at larger scales. The acquisition is also anticipated to strengthen AMD's GPU roadmap and market share. Financially, the divestiture of ZT's manufacturing business could potentially recoup $3-4 billion, helping to offset the acquisition cost.
The net financial impact is projected to be minimal if the expected growth in MI-family revenue materializes in 2026 and beyond. AMD's CTO, Mark Papermaster, will provide further details on the technological aspects of the acquisition at the Deutsche Bank Tech Conference on August 28th.
In other news, AMD also acquired Europe's largest private artificial intelligence laboratory, Silo AI, for about $665 million. Despite potential delays in NVIDIA's Blackwell chips release, Citi reaffirmed its Buy rating for the company, citing strong demand for AI that might increase orders for NVIDIA's H100 and H200 GPUs.
On the earnings front, AMD reported robust Q2 results, with revenues of $5.835 billion surpassing Street consensus by $110 million. The company's data center segment saw record revenue growth of 115% to $2.8 billion, highlighting its focus on expanding capabilities in the AI market.
In conclusion, AMD's strategic acquisitions and strong financial performance position the company well in the competitive AI market. Investors should keep an eye on the developments in this space as they could have a significant impact on AMD's growth trajectory and market position.