AMD shifts focus to AI systems design with $3bn sale of ZT manufacturing to Sanmina

Why Is AMD Selling ZT Systems’ Manufacturing Unit to Sanmina?

Advanced Micro Devices, Inc. (NASDAQ: AMD) announced on May 19, 2025, that it has entered into a definitive agreement to divest the U.S.-headquartered data center infrastructure manufacturing arm of ZT Systems to Sanmina Corporation (NASDAQ: SANM) for $3 billion. The transaction, which includes cash and stock consideration along with a contingent payment of up to $450 million, is expected to close by the end of 2025, subject to regulatory approvals.

This strategic realignment is not a surprise. When AMD acquired ZT Systems in August 2024, it had signaled its intent to eventually seek a manufacturing partner. This divestiture formalizes that strategy, transferring the capital-intensive operations of the ZT Systems business to Sanmina while retaining high-value design and enablement teams under AMD’s control.

What Strategic Capabilities Does AMD Retain?

While manufacturing shifts to Sanmina, AMD will keep ZT Systems’ rack-scale AI system design and cloud customer enablement functions. These teams are central to AMD’s push to accelerate time-to-market and improve deployment quality for cloud infrastructure clients. The company is pivoting toward a model where design, innovation, and cloud integration take precedence over physical production assets.

Forrest Norrod, AMD’s Executive Vice President and General Manager of its Data Center Solutions business, emphasized that by combining AMD’s AI systems design with Sanmina’s scale, the company expects to enhance U.S.-based production resilience and optimize delivery of AI systems for enterprise-scale deployments.

How Will the AMD–Sanmina Partnership Work?

Sanmina will become AMD’s preferred partner for new product introduction (NPI) manufacturing related to cloud racks and AI cluster-scale systems. Sanmina, a U.S.-headquartered global electronics manufacturing specialist, brings vertically integrated capabilities, robust logistics, and operational depth that allow it to handle high-volume, high-complexity production requirements.

Sanmina CEO Jure Sola stated that ZT Systems’ liquid cooling know-how, manufacturing capacity, and AI infrastructure experience are ideal complements to Sanmina’s broader industrial capabilities. With this acquisition, Sanmina aims to offer end-to-end solutions across the product lifecycle—from design and prototyping to mass manufacturing and service support—giving it a strengthened footprint in the hyperscale data center market.

What Are the Financial and Operational Implications?

The $3 billion transaction includes a contingent earn-out of up to $450 million, likely linked to revenue or margin targets. AMD is expected to receive this payment in a mix of cash and stock, boosting its liquidity and freeing capital for investments in core growth areas such as AI silicon, design innovation, and ecosystem partnerships.

The deal allows AMD to streamline operations by offloading capital-heavy manufacturing while still leveraging ZT Systems’ infrastructure through its ongoing relationship with Sanmina. With Sanmina assuming end-to-end manufacturing for cloud-scale infrastructure, AMD can concentrate on delivering differentiated performance and open ecosystem flexibility in its AI products.

How Does This Align with AMD’s Long-Term AI and Cloud Strategy?

AMD is increasingly positioning itself as a high-performance computing and AI platform leader. The company’s recent launches in GPU and AI accelerator markets—competing with NVIDIA and Intel—highlight its ambition in the next-gen compute space. However, one of AMD’s long-standing challenges has been aligning manufacturing scale with the speed of its innovation cycles.

By partnering with Sanmina and retaining its design teams, AMD is creating an asset-light model that increases its flexibility while preserving core competencies. The company is also prioritizing modularity, customization, and cloud integration—all of which are key to winning enterprise and hyperscale clients deploying generative AI workloads.

Moreover, AMD’s support for an open ecosystem of accelerators and software stacks is a deliberate contrast to vertically integrated competitors, allowing customers to build bespoke solutions using AMD’s AI systems.

How Are Investors and Institutions Responding to the Divestiture?

Investor sentiment toward AMD has been broadly positive following this strategic update. As of May 20, 2025, AMD’s stock closed at $113.51, recovering sharply from a YTD low of $78.21 recorded in early April. Much of this upward momentum is attributable not only to the Sanmina transaction, but also to a confluence of recent strategic wins.

On May 15, AMD announced a new $6 billion stock repurchase program, reinforcing investor confidence in its financial health and capital allocation strategy. Just days prior, AMD disclosed a $10 billion partnership with Saudi Arabia’s Humain to build sovereign AI infrastructure, signaling a pivot to high-demand emerging markets amid global regulatory volatility in China.

On the earnings front, AMD beat expectations in Q1 2025, posting revenue of $7.4 billion (up 36% YoY) and non-GAAP EPS of $0.96. These numbers outperformed Wall Street forecasts and indicated strong uptake of AMD’s data center and AI solutions.

Institutional flows corroborate this bullish sentiment. Parnassus Investments added over 4.1 million shares of AMD, expanding its long position. Meanwhile, Morgan Stanley trimmed its holdings by 3.65%, indicating some degree of portfolio rebalancing but not a bearish shift. Overall, fund managers are increasingly aligning their AMD exposure with long-term AI and compute infrastructure growth themes.

How Is the Market Reacting to Sanmina’s Role in the Deal?

Sanmina Corporation, the less high-profile party in the transaction, saw its shares decline 5.58% to $79.84 following the announcement. The dip likely reflects short-term profit-taking and concerns over integration costs or dilution from the equity portion of the deal. However, longer-term prospects appear favorable.

The ZT Systems acquisition will significantly expand Sanmina’s presence in AI hardware manufacturing, which is a growth segment. Management has stated the deal will be accretive to non-GAAP EPS within the first year post-close. Institutional activity has been mixed—EP Wealth Advisors opened a new long position, while Price T Rowe Associates reduced its holdings by nearly 59%, suggesting caution among large-cap value investors.

That said, the AI manufacturing value chain remains underbuilt relative to demand. Sanmina’s strategic alignment with AMD gives it a clear revenue pipeline and a chance to establish leadership in the outsourced hyperscale compute segment.

What Do Analysts Recommend: Buy, Sell, or Hold?

Analyst recommendations lean optimistic for AMD. Bank of America recently reiterated its Buy rating and raised the target price to $130, citing AMD’s positioning in sovereign AI deals, AI chip design, and resilient earnings. Given its strengthening balance sheet and rising institutional interest, AMD is now viewed as a top-tier AI infrastructure play alongside NVIDIA.

For Sanmina, the consensus is more measured. Analysts suggest a Hold position for now, advising investors to monitor the post-deal financials, integration metrics, and customer traction in AI markets. Any successful expansion into high-margin cloud infrastructure manufacturing would likely trigger upward revisions.

What’s Next for AMD and Sanmina in AI Infrastructure?

AMD is expected to continue investing in high-performance compute innovation, particularly in its MI series of AI accelerators and next-gen EPYC server processors. The retained ZT Systems design unit will likely be key to AMD’s future rack-scale product launches, especially those built for hyperscale AI clusters.

The company’s open ecosystem stance—supporting multiple vendors and standards—is drawing interest from enterprise clients seeking flexibility and modularity, especially in sovereign or industry-specific AI use cases. Meanwhile, AMD’s shift toward AI-dedicated chip design will require rapid iteration and seamless deployment—a task now simplified through Sanmina’s new NPI manufacturing support.

Sanmina, on the other hand, is positioned to become one of the few U.S.-based contract manufacturers with deep specialization in AI cooling, power delivery, and scalable compute chassis. If executed well, this deal could redefine its role in the electronics manufacturing services sector.