California-based semiconductor manufacturer AMD is looking to take on Nvidia for a bigger share of business from the artificial intelligence boom. AMD plans to purchase data center equipment maker ZT Systems in a cash and stock deal that values the company at $4.9 billion. The deal, which is subject to regulatory approval, is part of AMD’s goal of offering a wider selection of chips, software and system designs to big data enterprise clients such as Microsoft, Google, Meta Platforms and Apple. Privately held ZT Systems, based in New Jersey, makes gear and server solutions for cloud computing and related infrastructure.

“The deal could bolster AMD’s competitive position against Nvidia, which also has added aggressively to its data-center offerings in recent years,” writes The Wall Street Journal, noting that Nvidia in 2020 purchased networking company Mellanox for about $7 billion, “bringing in supercomputing-grade data transfer capabilities that have helped it maintain its edge during the AI boom.”

In recent years, Nvidia “increasingly has focused on designs for servers and data centers that its chips go into,” WSJ points out.

Launched in 1994, “ZT designs and makes servers, server racks and other infrastructure that house and connect chips in the giant data centers that power artificial-intelligence systems” like OpenAI’s ChatGPT, says WSJ, which notes that nearly half of ZT’s 2023 revenue of $22.7 billion came from equipment sales.

Despite that, AMD plans to divest of ZT’s manufacturing ops after close, keeping only its system-design business.

AMD CEO Lisa Su said ZT’s “main value for her company is in offering customers more hands-on assistance in setting up huge data centers where clusters of chips train up AI systems,” according to WSJ.

ZT “works closely with big chipmakers such as Nvidia and Intel across areas such as server solutions for storage, GPU/accelerators, high-performance computing, 5G and edge computing,” TechCrunch reports.

Systems design is gaining parity with production in terms of model training and deployment, Axios explains, adding that AI customers “want whole systems of hardware, chips, networking and software designed for them.”

This month, “AMD completed a $665 million all-cash acquisition of Silo AI, an AI integration firm based in Finland,” Axios reports. The move shows how serious the Santa Clara-based AMD is about challenging neighboring Nvidia’s current AI supremacy.

The deal includes a payment of up to $400 million contingent on “certain post-closing milestones,” AMD said in an announcement that predicts the acquisition will close “by the end of 2025.”