AMD Sells Off A $5 Billion Powerhouse: What's The Catch In This $3 Billion Deal?

Advanced Micro Devices, Inc. AMD shares are trading lower on Monday after the company disclosed a definitive deal to sell its ZT Systems‘ U.S.-based data center infrastructure manufacturing business to Sanmina Corporation SANM for $3 billion in cash and stock.

Details: Sanmina will acquire the operations for $2.25 billion in cash for assets at the target net asset value (subject to adjustments) and a $300 million premium of 50% cash and 50% equity.

The inclusion of equity and a long-term contingent payment in the consideration structure is intended to further align the interests of Sanmina and AMD in connection with the establishment of their new strategic partnership.

The Sanmina equity issued to AMD will be subject to a three-year lock-up period commencing upon the closing of the transaction.

The transaction is anticipated to close near the end of 2025, pending regulatory approvals and customary closing conditions.

As part of this deal, Sanmina will become a preferred partner for manufacturing the initial production runs (NPI) of AMD’s cloud rack and cluster-scale AI solutions.

AMD will retain ZT Systems’ design and customer support teams to speed up the development and deployment of high-quality AMD AI systems for its cloud customers.

ZT Systems currently operates with an approximate annual net revenue run rate in the range of $5 billion to $6 billion, and its future prospects appear favorable due to the introduction of new accelerated computing platforms.

The company’s sophisticated liquid cooling technologies and production sites in New Jersey, Texas, and the Netherlands, coupled with its worldwide supply network, enable it to offer complete end-to-end system integration, from individual parts to fully assembled racks, for the Cloud and AI infrastructure ecosystem.

Forrest Norrod, executive vice president and general manager, Data Center Solutions business unit at AMD said, “By combining the deep experience of our AI systems design team with our new preferred NPI partnership with Sanmina, we expect to strengthen our U.S-based manufacturing capabilities for rack and cluster-scale AI systems and accelerate quality and time-to-market for our cloud customers.”

As of March 29, Sanmina’s cash and cash equivalents stood at $647 million.

Investors can gain exposure to AMD via Direxion Daily AMD Bull 2X Shares AMUU and Amplify Video Game Leaders ETF GAMR.

Price Action: AMD shares are down 1.6% at $115.29 at last check Monday.

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