From AMD seeking to win new AI data center share from Nvidia to ZT Systems’ business with cloud hyperscalers, here are five big reasons why AMD’s planned $4.9 billion acquisition of ZT Systems could put pressure on rival Nvidia.

From ZT Systems signing a new partnership with Nvidia in 2024 to AMD’s data center and PC chip future, there are some major elements to AMD’s planned $4.9 billion acquisition of ZT Systems that every channel partner, investor and customer should know.

On Monday, AMD said it had signed a definitive agreement to buy ZT Systems with the goal of accelerating its AI hardware and software technology.

ZT Systems is a key global player in the data center infrastructure market, which is where Nvidia holds a leading position.

[Related: AMD CEO: ZT Systems Buy For $4.9B Is Our ‘Next Major Step’ In AI]

“ZT adds world-class systems design and rack-scale solutions expertise that will significantly strengthen our data center AI systems and customer enablement capabilities,” said AMD Chair and CEO Lisa Su in a statement Monday. “This acquisition also builds on the investments we have made to accelerate our AI hardware and software road maps.”

Santa Clara, Calif.-based AMD in 2022 acquired Xilinx for $35 billion, its largest acquisition at that time.

In terms of the actual deal itself, AMD will pay $4.9 billion in a cash and stock transaction. This is inclusive of a contingent payment of up to $400 million based on certain post-closing milestones, according to AMD. AMD expects the deal to close by the end of 2025.

Looking at AMD’s broader goal and future plans with ZT Systems, key will be putting more pressure on AI hardware rival Nvidia.

Here are five big things to know about what AMD’s planned acquisition of Secaucus, N.J.-based ZT Systems means for the processor and semiconductor industry.

ZT Systems Just Signed A Partnership With Nvidia; AMD CEO Will ‘Honor’ It

ZT Systems and Nvidia formed a partnership in March around Nvidia’s Blackwell platform. ZT Systems combined Nvidia Blackwell GPUs with its hyperscale-focused design, manufacturing, integration and deployment capabilities.

In June, ZT Systems unveiled its ACX200 server platform featuring the Nvidia BG200 Grace Blackwell Superchip. Fifth-generation Nvidia NVLink switch trays and specialized cable cartridges provide high-bandwidth and low-latency connections between GPUs, enabling the entire ACX200 system to function as a single massive GPU, the company said.

In an interview with the Financial Times, Su said AMD will “honor” ZT Systems’ previous commitments.

“We certainly believe ZT as part of AMD will significantly accelerate the adoption of AMD AI solutions,” Su said in the interview. “[But] we have customer commitments, and we are certainly going to honor those.”

ZT Systems’ Data Center Tech With AMD Instinct Is Key Vs. Nvidia

ZT Systems offers a huge value proposition for AMD by being a major provider of blueprints for advanced data center systems that power cloud computing and AI.

The company specializes in designing servers, rackmounts and other data center infrastructure.

AMD said the acquisition will accelerate the adoption of its Instinct line of AI data center chips. These chips compete directly with Nvidia’s highly popular GPUs.

“Combining our high-performance Instinct AI accelerator, EPYC CPU and networking product portfolios with ZT Systems’ industry-leading data center systems expertise will enable AMD to deliver end-to-end data center AI infrastructure at scale with our ecosystem of OEM and ODM partners,” said Su (pictured).

AMD Striving For Nvidia’s ‘System’ Approach To Data Center Chip Market

AMD is seeking to break Nvidia’s market hold on the AI data center chip market.

A major part of Nvidia’s success comes from its system approach to the AI semiconductor market by providing end-to-end computing infrastructure that includes packaged racks of server, software and networking tools. The goal is to make it easier for developers to build AI applications on its chip infrastructure.

Last year, AMD launched its MI300 portfolio of AI chips. It plans to launch its new MI350 chip next year to compete against Nvidia’s new Blackwell GPUs.

Su said ZT Systems will enable AMD to deliver “end-to-end data center AI infrastructure.”

“ZT adds world-class systems design and rack-scale solutions expertise that will significantly strengthen our data center AI systems and customer enablement capabilities,” she said.

AMD Diving Into PC Chip Market; ZT Systems’ Expertise Will Help

Nvidia and Intel design AI-capable chips for PCs.

In April, AMD unveiled a new line of processors to expand the company’s commercial mobile and desktop AI PC portfolio.

The new AMD Ryzen Pro 8040 series processors are made for mobile workstations and laptops. In addition, AMD’s new Ryzen Pro 8000 processors take the advances in general- purpose and AI computing that came with the Ryzen 8000 chips that launched a few months ago and add enterprise-grade remote management and security features, such as AMD Memory Guard, for business customers.

ZT Systems has approximately 2,500 employees and generates annual revenue of around $10 billion. The company is an innovator around compute, storage, 5G, GPUs and high-performance computing.

ZT Systems can no doubt help AMD with its goal of becoming a more prominent player in the PC chip market with its thousands of employees and engineers.

Nvidia And AMD Fight For Hyperscaler Customers

One key market that ZT Systems plays in is providing infrastructure and offerings for the largest cloud companies in the world, known as hyperscalers.

The three largest hyperscalers are currently Amazon Web Services, Google Cloud and Microsoft. As of second-quarter 2024, AWS owns 32 percent market share, followed by Microsoft at 23 percent share, then Google Cloud at 12 percent share.

Cloud hyperscalers spend billions each year buying and building infrastructure to power their cloud services. Cloud data centers are filled with thousands of servers, storage, data protection, networking and power hardware. Sometimes hyperscalers manufacture the infrastructure themselves, but other times they need to buy infrastructure from other IT providers to meet demand and scale.

Both Nvidia and AMD are battling to win customer mindshare from AWS, Google Cloud and Microsoft.

ZT Systems specializes in providing servers and systems design to hyperscalers for cloud computing and AI.

ZT Systems is privately held and doesn’t reveal its hyperscale cloud customers.