A rival to Nvidia has agreed to pay nearly $5 billion for a maker of data centre equipment as it seeks to gain a bigger share of the market for chips that drive artificial intelligence.

Advanced Micro Devices, based in Santa Clara, California, plans to buy ZT Systems, a designer of equipment for cloud computing and AI.

AMD is the main rival to Nvidia in the design of graphics processing units, chips that can perform mathematical calculations on large data sets in parallel and at high speed. There has been a surge in demand for such GPUs from companies experimenting with AI-powered innovations.

Founded in 1969 and with a market capitalisation of about $247 billion, AMD said it was buying ZT Systems so that it could test and roll out its latest AI GPUs more quickly and at the scale required by cloud computing groups such as Microsoft. It will benefit from the addition of about 1,000 ZT Systems engineers to help to speed up its growth plans.

Lisa Su, the chief executive of AMD, said: “The main way [ZT Systems] is additive to the company is that we sell more GPUs.”

AMD planned to break off its server manufacturing business and would sell it once the deal had been completed, as it had no plans to compete with companies such as Super Micro Computer, Su, 54, said. At present, ZT Systems generates annual revenues of about $10 billion.

Nvidia is by far the dominant player in GPUs, with a market share of 88 per cent in the first quarter of the year, compared with 12 per cent for AMD, according to Jon Peddie Research, a computer graphics specialist.

Microsoft said in May that it planned to offer its cloud computing customers a platform of AMD artificial intelligence chips, which would compete with components made by Nvidia. The MI300X AI chips from AMD will be sold through Microsoft’s Azure cloud computing service, giving customers an alternative to Nvidia’s product, which can be hard to obtain owing to high demand.

AMD said it would acquire ZT Systems for $4.9 billion. It has agreed to pay for 75 per cent of the acquisition with cash and the remainder in stock. The company had $5.34 billion in cash and short-term investments as of the second quarter.

Frank Zhang, ZT Systems’ chief executive, will join AMD and will report to Forrest Norrod, its data centre chief.

AMD’s shares closed up by $6.72, or 4.5 per cent, at $155.28 in New York on Monday.