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Advanced Micro Devices won’t unseat Nvidia as the top AI chipmaker anytime soon. But the company’s latest AI acquisition shows its willing to get creative to fortify its place in the rapidly growing market. AMD on Monday announced a $4.9 billion deal to purchase privately held server maker ZT Systems. The transaction, which is expected to close in 2025, is 75% in cash and the rest in stock. The deal is a wise move to better service the tech giants that are major buyers of artificial intelligence chips, according to Jim Cramer. It’s not enough, however, to overtake fellow Club holding Nvidia’s dominance in the market. “People are claiming this is a Nvidia killer. Forget about that. It’s something that helps [AMD] keep up with Nvidia,” he added. “[CEO Lisa Su] hasn’t been able to rival that. Well, now she can.” Specifically, the deal is about AMD trying to keep up with Nvidia in the design of so-called AI systems, an increasingly important part of the market as AI workloads get more complex and popular. The graphics processing units (GPUs) designed by Nvidia and AMD perform the computations that make AI applications possible – but they’re only one piece of the larger AI computing network, which generally contains thousands of servers stitched together inside data centers. Nvidia has a significant advantages designing system-level solutions for its AI chips. For example, a key product in its next-generation Blackwell lineup, dubbed the GB200 NVL72, is billed as a rack-scale system. AMD bought ZT Systems for its employees’ expertise in that area. In fact, AMD plans to divest ZT System’s server manufacturing business, which accounted for the majority of its revenue last year, according to Bank of America analysts. In other words, AMD bought ZT Systems for its engineers and other employees who work in server design to make its GPU offerings more attractive to the data-center operators that buy them or might want to buy them. Think tech heavyweights like fellow Club holdings Microsoft , Amazon , Meta Platforms and Google parent Alphabet . “She is sticking by her $400 billion 2027 AI projection,” Jim said, referencing Su’s outlook on the size of the AI chip market in the years to come. “And if that is the case, she’s going to need every engineer possible…Lisa Su needed to do this.” AMD YTD mountain Advanced Micro Devices (AMD) year-to-date performance AMD shareholders seem upbeat on the acquisition, as well. Shares added nearly 4%, to around $154 each, outperforming the broader market and a closely followed index of semiconductor stocks . AMD’s growing AI chip business is a key part of our investment thesis. Quarterly sales of its MI300 chips, which launched in late 2023, exceeded $1 billion for the first time in the April-to-June period. Management also raised its full-year sales outlook for the chip to over $4.5 billion, a $500 million jump from previous projections in April. Su noted during AMD’s second-quarter earnings call on July 30 that the company will be investing more into system-level integration of its chips — comments that take on a different light after Monday’s announcement. Wall Street analysts have mixed views on the transaction. KeyBanc argued that the “acquisition likely bolsters AMD’s complete server system’s capability, allowing the company to remain competitive with NVDA’s GB200 NVL full system rack solutions.” Meanwhile, Bank of America said that the firm is “at-best of neutral view on the proposed transaction as near-term it appears to be a complex deal just to get 1000 system design engineers and then hoping they help drive incremental AMD GPU sales.” Still, analysts reiterated their buy rating on shares. This is AMD’s second acquisition of the summer intended to shore up its competitive position against Nvidia, which has built a robust software ecosystem over the years that complements its chips. Last week, AMD completed its purchase of Silo AI, a European AI lab that will expand its software capabilities. (Jim Cramer’s Charitable Trust is long AMD, NVDA, AMZN, MSFT, META, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Lisa Su, chairwoman and CEO of Advanced Micro Devices (AMD), delivers the opening keynote speech at Computex 2024, Taiwan’s premier tech expo, in Taipei on June 3, 2024.
I-Hwa Cheng | Afp | Getty Images
Advanced Micro Devices won’t unseat Nvidia as the top AI chipmaker anytime soon. But the company’s latest AI acquisition shows its willing to get creative to fortify its place in the rapidly growing market.
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