AMD (NASDAQ: AMD) goes on billion-dollar headhunt for AI design engineers

Advanced Micro Devices (NASDAQ: AMD) said earlier this month that it would pay nearly $5 billion to buy private server manufacturer ZT Systems in a so-called acqui-hire that will allow it to add 1,000 system design engineers to its ranks. The move, effectively a large-scale headhunt for top talent, underscores the significant costs of competing with Nvidia (NASDAQ: NVDA) to power the ongoing AI revolution.

While CEO Lisa Su said AMD is already quite competitive when it comes to hardware and software design, she predicted the transaction would give it a lead over Nvidia in the development of advanced and customized server configurations that its clients are seeking out. The company plans to divest ZT’s manufacturing business once the deal closes next year.

“This is the next major step in our long-term strategy to deliver leadership AI solutions,” she said in a conference call, adding the people she was bringing on from ZT had deep design expertise in segments including motherboard, power, thermal, networking and rack design. “We’re going to add a very talented group of design engineers who know everything about deploying rack-scale infrastructure in the cloud environment.” 

The agreement follows the recent acquisition of AI software firm Silo AI, for which AMD paid $665 million to bring over around 300 software programmers. That’s a whopping finding fee, averaging more than $2 million per new employee. The ZT transaction comes out to around $5 million per design engineer, although AMD should be able to recoup some of that if it successfully sells the server manufacturing business. 

AMD reported modest revenue gains during its last quarter, but the company isn’t growing nearly as fast as Nvidia. That can help explain why its shares have surged a paltry 46% over the past year when compared to its competitor’s shares that skyrocketed 175% over the same period. AMD shares rose 10% after the news of the ZT acquisition, which suggests investors liked what they heard.

“We’re in a place where these AI systems are getting more and more complex, and the key is how do we get these leadership capabilities into market as fast as possible,” Su said, fully committing to an AI-dominated agenda despite some questions in the marketplace about a possible hype-cycle that could soon be due for a correction. “AI is the most transformational technology of the last 50 years and our number one strategic priority. We believe AI has the potential to drive unprecedented growth over the coming years.”

Amid fears about how AI might eventually reshape the workplace, the deal for ZT demonstrates that top human talent is still very much in demand and highlights the escalating value of specialized engineering expertise. When it comes to actually paying the new employees, meanwhile, AMD said the 1,000 additions to its payroll will cost it $150 million a year, or about $150,000 per person. The fact that the company is willing to shell out $5 million just to find each one suggests the highly valued newcomers might all want to start their first day at their new employer by asking for a raise.