In a strategic move that underscores the rapid evolution of the data center and AI infrastructure landscape, Advanced Micro Devices, Inc. (AMD) has announced a definitive agreement to divest the data center infrastructure manufacturing business of ZT Systems to Sanmina Corporation for a deal valued at up to $3 billion.

The transaction, which includes $2.55 billion in cash and stock along with a contingent payment of up to $450 million, marks a pivotal shift for AMD as it refocuses its efforts on design and engineering while outsourcing manufacturing to a specialized partner. The announcement, detailed in a press release on AMD’s investor relations website, AMD Investor Relations, highlights the company’s intent to retain ZT Systems’ rack-scale AI solutions design and customer enablement expertise, ensuring it maintains a competitive edge in the cloud and AI markets.

The divestiture comes on the heels of AMD’s acquisition of ZT Systems, a move initially aimed at bolstering its capabilities in providing end-to-end AI infrastructure solutions for hyperscale cloud providers. By selling off the manufacturing arm to Sanmina, a leading integrated manufacturing solutions company, AMD is streamlining its operations to focus on high-value design and innovation. According to AMD Investor Relations, this partnership with Sanmina establishes a preferred New Product Introduction (NPI) manufacturing relationship, aligning with AMD’s long-term strategy to enhance quality and accelerate time-to-deployment for its cloud customers. This approach also reflects a broader industry trend where semiconductor giants are increasingly offloading capital-intensive manufacturing to contract manufacturers to optimize resources and focus on core competencies like chip design and software integration.

Sanmina, based in San Jose, California, stands to gain significantly from this acquisition, expanding its footprint in the burgeoning cloud infrastructure market. As reported by Digitimes, the deal positions Sanmina as a key player in the production of data center hardware tailored for AI workloads, a segment experiencing explosive growth driven by the demands of generative AI and machine learning applications. Sanmina’s expertise in high-complexity manufacturing and its established relationships with hyperscalers make it an ideal partner for scaling production to meet the needs of AMD’s customer base. The Digitimes report further notes that this acquisition enhances Sanmina’s capabilities in rack-scale systems, a critical component of modern data centers optimized for AI training and inference tasks.

For AMD, the transaction is not just about operational efficiency but also about strengthening its competitive stance against rivals like Nvidia in the AI hardware space. By retaining ZT Systems’ engineering talent, AMD ensures it can continue to innovate in system-level design while leveraging Sanmina’s manufacturing prowess to bring solutions to market faster. Industry analysts see this as a calculated move to balance cost structures with innovation imperatives, especially as the AI infrastructure market becomes increasingly cutthroat.

This deal also signals a maturing data center ecosystem where specialization is key. As hyperscalers demand ever-more customized solutions, partnerships like the one between AMD and Sanmina could set a precedent for how semiconductor firms and contract manufacturers collaborate to address the complex needs of cloud and AI infrastructure. With the transaction expected to close in the coming months, pending regulatory approvals, the industry watches closely to see how this reshapes the competitive dynamics of a sector at the heart of technological transformation.