Chipmaker Advanced Micro Devices (AMD) has agreed to buy ZT Systems, a data-center equipment designer, for nearly $5 billion in a move to strengthen its position against Nvidia (NVDA) in AI computing. The acquisition will allow AMD to offer a broader range of chips, software, and system designs to big data-center clients like Microsoft (MSFT) and Meta (META) which should help give it a competitive edge in the AI infrastructure market.
AMD CEO Lisa Su emphasized that the acquisition would enable AMD to provide more tailored support to customers building AI training clusters. Interestingly, ZT generates over $10 billion in annual sales. However, AMD plans to sell its manufacturing business post-acquisition and focus on system design.
The acquisition is one of AMD’s largest, second to its purchase of Xilinx for nearly $50 billion in 2022. This move, along with other strategic acquisitions, will allow AMD to compete more aggressively in the AI market, where Nvidia has been dominant. The deal is expected to close in the first half of next year if it receives all regulatory approvals.
Is AMD a Buy or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMD stock based on 24 Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 42% rally in its share price over the past year, the average AMD price target of $189.88 per share implies 24.04% upside potential.
