AMD stock maintains hold rating amid ZT Systems acquisition By Investing.com

On Monday, Deutsche Bank maintained a Hold rating on Advanced Micro Devices, Inc. (NASDAQ:) with a price target of $150.00, following AMD’s announcement of its plans to acquire server systems provider ZT Systems. The deal, valued at $4.9 billion, which includes a mix of 75% cash and 25% stock and a $400 million contingent payment, aims to bolster AMD’s server and AI data center capabilities.

The acquisition is designed to secure 1,000 systems design engineers to enhance AMD’s existing range of component solutions and to speed up its expansion into system- and rack-level AI Data Center compute solutions. While ZT Systems reported approximately $10 billion in last twelve months (LTM) revenues, AMD plans to sell off ZT’s manufacturing business, which accounts for the majority of this revenue, within 12 to 18 months after the deal closes.

The strategic move is expected to be earnings accretive post-2025 and is anticipated to close in the first half of 2025. Deutsche Bank views the transaction as a critical step for AMD to compete more effectively with NVIDIA (NASDAQ:) in servicing cloud customer AI needs at larger scales. The acquisition is also seen as a way to strengthen AMD’s GPU roadmap and market share.

Financially, the divestiture of ZT’s manufacturing business could potentially recoup approximately $3-4 billion, assuming certain growth targets are met. This would help to mitigate the acquisition cost, which is initially set at a $4.9 billion headline price. The deal is projected to add $150 million to operating expenses, a 2% increase compared to Deutsche Bank’s 2026 estimates, but the net financial impact is deemed minimal if the expected growth in MI-family revenue materializes in 2026 and beyond.

Further details regarding the technological aspects of the acquisition will be discussed when AMD’s CTO, Mark Papermaster, attends the Deutsche Bank Tech Conference on August 28th.

In other recent news, Advanced Micro Devices (AMD) continues to make strategic moves to solidify its position in the AI market. The company recently acquired server manufacturer ZT Systems for $4.9 billion, a move that is expected to enhance its AI offerings. AMD also completed the acquisition of Europe’s largest private artificial intelligence laboratory, Silo AI, for approximately $665 million.

Despite anticipated delays in the release of NVIDIA’s Blackwell chips, Citi reaffirmed its Buy rating for the company, predicting that strong demand for AI might lead to increased orders for NVIDIA’s H100 and H200 GPUs. Meanwhile, Wolfe Research maintained its positive stance on AMD’s shares, following the company’s acquisition of ZT Systems.

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. These developments underline the company’s focus on expanding its capabilities in the rapidly evolving AI market.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.