Advanced Micro Devices (NASDAQ: AMD) continues to shine brightly in the stock market cosmos. Emerging as a formidable adversary to Intel in the CPU domain, and with a robust stronghold in the gaming sphere through its GPUs, AMD’s trajectory has been nothing short of meteoric.
Over the last decade, the stock has surged more than 3,000%, propelled in part by the unexpected ally of the pandemic and more recently, the AI renaissance.
The journey forward is no cakewalk for AMD. To meet the towering expectations of investors, the company must maneuver nimbly to keep stride with AI stalwart Nvidia. Encouragingly, AMD is rising to the challenge, evident in the record-breaking surge of data center revenue by 115% to $2.8 billion in the second quarter.
Adding fuel to the fire, AMD recently bolstered its AI foothold by acquiring ZT Systems for a hefty $4.9 billion.
Image source: Getty Images.
Introducing ZT Systems
ZT Systems stands tall as a premier provider of all-purpose compute infrastructure for tech titans like Amazon Web Services and Microsoft Azure. AMD anticipates that these AI setups will synergize harmoniously with its own chip and software prowess.
Moreover, AMD intends to divest ZT Systems’ manufacturing arm, aligning with its fabless semiconductor strategy. The acquisition is poised to fortify AMD’s AI training and inference capabilities, while ZT Systems’ cloud services will pave the way for AMD’s AI infrastructure deployment on a grand scale.
AMD’s roadmap seemingly hints at more acquisitions as it assembles a comprehensive suite of AI resources. The company foresees the acquisition contributing positively to adjusted earnings by the close of 2025.
By assimilating the server manufacturer, AMD gears up to vertically integrate downstream, offering rack and server systems that are highly sought-after by consumers, steering away from merely vending semiconductor components. In the cutthroat arena of server systems competition catering to cloud infrastructure enterprises and other purchasers, ZT Systems serves as a pivotal asset to propel AMD’s AI growth forward.
Speaking on the acquisition, AMD CEO Lisa Su emphasized how it will expedite the deployment of AMD’s new AI GPUs at the scale that industry giants such as Microsoft demand. Su stressed that “AI systems are our number one strategic priority” in a dialogue with Reuters.
AMD’s Bold Play in the GPU Arena
Despite Nvidia’s stranglehold on the data center GPU domain, AMD remains a steadfast contender with promising prospects.
Where GPUs are concerned, it’s not a winner-takes-all spectacle, though dislodging Nvidia’s supremacy presents a Herculean task. As the runner-up, AMD enjoys certain advantages. A scarcity of data center GPUs persists as behemoths like Microsoft, Meta Platforms, and Alphabet scramble to construct AI infrastructure, fueling demand for these components. The recent hiccup with the Blackwell platform might exacerbate this dearth.
Furthermore, customers harbor eagerness to dismantle Nvidia’s GPU monopoly and drive down prices in the sector, a transformation that takes time but serves the interests of buoying AMD as an alternative choice for GPU procurers.
Is AMD a Rewarding Investment?
AMD’s acquisition of ZT Systems follows closely on the heels of another significant AI purchase – Silo AI, a deal valued at $665 million. Silo AI’s technology aids businesses in crafting expansive language models, marking one of several AI enterprises AMD has absorbed in its quest to fortify its AI armamentarium.
With this strategic maneuver and robust growth in segments such as data center and client (primarily PCs), AMD is on a trajectory of accelerating expansion. As the company taps into the skyrocketing demand for AI chips, the stock is poised for further ascension.
The stock’s rally shows no signs of abating.
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