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Advanced Micro Devices (AMD) opened in the red this morning after announcing plans of selling ZT Systems to San Jose-headquartered Sanmina (SANM) for $3.0 billion in cash and stock.
However, it will retain the data center infrastructure firm’s engineering team, comprising a total of 1,200 experts, for about $1.6 billion, a press release confirmed on Tuesday.
AMD shares have rallied in recent weeks, partly due to the 90-day trade truce between the U.S. and China. At the time of writing, they’re up more than 30% versus their April low.
What ZT Divestiture Means for AMD Stock
The planned divestiture of ZT Systems that is expected to close in the final quarter of 2025 could help the chipmaker streamline its focus on AI computing and cloud-based solutions.
Unloading the data center infrastructure manufacturing company brings $2.25 billion in cash that strengthens AMD’s balance sheet as well.
Additionally, retaining ZT’s engineering team will help AMD “compete better with Nvidia in the data center GPU market via additional system experience and faster hyperscale deployment times,” as per Christopher Danely – a senior Citi analyst.
AMD Shares May Still Find It Hard to Fly
Despite seeing the chipmaker’s divestiture of ZT as a positive, Citi maintained its “neutral” rating on AMD shares today. Danely’s $100 price target indicates potential downside of more than 10% from here.
Investors should note that AMD stands to get hurt as President Donald Trump continues to make it harder for U.S. chipmakers to be in business with China moving forward.
On the most recent earnings call, the company’s management told investors that export controls could result in up to $1.5 billion in lost revenue this year.
Plus, Intel’s price cuts could threaten the chipmaker’s gross margin as well in 2025, which may also make it even more difficult for AMD stock to extend gains.
Should You Invest in AMD at Current Levels?
Despite aforementioned challenges, other Wall Street analysts remain constructive on AMD stock for 2025.
The consensus rating on Advanced Micro Devices currently sits at “Strong Buy” with the mean target of nearly $129 indicating potential upside of as much as 13% from current levels.
