AMD is looking to 'catch up to' Nvidia with ZT systems deal

Advanced Micro Devices (AMD) has officially agreed to purchase server builder ZT Systems in a cash and stock deal valued at $4.9 billion. The Futurum Group chief market strategist Cory Johnson joins Market Domination Overtime to discuss the implications of this acquisition for AMD's future.

Johnson notes that this deal positions AMD as "a more complete offering" among its competitors, particularly Nvidia (NVDA). He points out that Nvidia's systems are "complete," with the company managing operations well beyond just chip sales. The ZT acquisition "gives AMD something closer" to achieving this level of control, though Johnson acknowledges there's still a considerable gap to close.

A key benefit of the acquisition, according to Johnson, is the influx of engineering talent. This will give AMD an edge in designing complete systems. "This looks to be like a really great deal for AMD," Johnson tells Yahoo Finance. He emphasizes AMD's position as "the number two player in this space," noting that they are "trying to catch up to what Nvidia's been doing."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video Transcript

A MD is taking aim at the throne.

Today, the chip maker agreed to buy server maker ZT systems in a cash and stock deal valued at $4.9 billion.

This adds data center technology that will bolster its efforts to challenge sector leader in video.

Joining us now, Cory Johnson, chief market strategist at the future group.

Cory.

Thanks for being here.

It so I wore my Yahoo purple today.

Oh, that very, very on point and on the, we always appreciate that.

So Corey um does, how far does this take A MD towards challenging NVIDIA?

You know, one could argue they've been a little bit behind in this space?

Yeah, it takes them further and it, it makes up for a more complete offering from a MD.

NVIDIA gets all fantastic credit for the fantastic chips that they're making.

But I think what's less understood is how complete their systems are both from manufacturing actual systems to even managing their own data centers to also um having a really deep software bench where they've been working on software, their C A software since 2006 where they've really been teaching developers how to use CUD A that will do many things in a data center, including using NVIDIA chips.

And it has made a real complete system and more of a moat, this gives a MD something closer uh further along in their efforts to be more like NVIDIA, certainly not there at all, uh even with this, but it certainly gives them a big leap forward.

There's an estimated 100 engineers will be acquiring this acquisition and that alone should triple the number of engineers they got working on these system solutions at a MD.

Yeah, Corey.

On that point, it was interesting because I saw some analysts who cover a MD and they were saying to them this, that's what this looked like.

It looked like a big aqua hire, you know, you're picking up 1000 data center uh design engineers.

Um Do you, do you think that's a good description of what we're seeing here?

Core and how much?

And you know, how, what does it tell us about the kind of demand there is out there if so for these kind of engineers?

Well, yeah, look at this.

They're requiring 1100 engineers at $4.6 million per engineer.

Roughly if those are, the numbers are right from what we understand.

1100 they didn't tell us in the, in the press release, we'll see how many stay, we'll see how, how this business um uh uh can grow within a MD.

Uh But the idea of designing systems, not just selling chips but but selling designs systems into data centers, into the hyper scalars is a different approach than A MD has been able to muster in the past and, and make no mistake about it.

While their market share is probably less than 5% of, of A I data center chips.

They are the number two player in this space and they're trying to catch up to what NVIDIA has been doing and if the numbers we're seeing are right, this is a pretty cheap deal.

I mean, what else are they gonna do?

Like acquire super micro uh at at $36 billion?

I mean, that wasn't a realistic thing for them but to really make this really big push into systems at a relatively low price, it's not even all cash, it's a cash and stock deal.

Um Again, they haven't broken out the how much is cash and how much is stock.

Um This looks to be like a really great deal uh for a MD.