Why AMD's $4.9 Billion AI Server Acquisition Makes Sense
Advanced Micro Devices (NASDAQ: AMD) finds itself trailing far behind Nvidia in the AI accelerator market. Nvidia has some critical competitive advantages working its its favor. It was the first mover as demand for artificial intelligence (AI) chips exploded, and its CUDA computing platform has become entrenched in academia and industry over the past 18 years.
AMD expects to sell more than $4.5 billion worth of AI accelerators this year, with its lineup headlined by the powerful Instinct MI300X. The company supercharged its AI efforts this week with the $4.9 billion acquisition of ZT Systems, a server-solutions provider with a customer list spanning cloud computing companies and telecom giants.
When I first saw that AMD was shelling out this much for a server company, it sounded like a terrible idea. The business of designing, manufacturing, and selling server systems is a low-margin affair. Super Micro Computer, which has emerged as a leader in the AI server business, managed a gross margin of just 11.2% in its latest quarter. AMD's gross margin hovers around 50%.
Source Fool.com
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