Amazon has recently revealed a significant $84.5 million stake in chipmaker AMD, stemming from a prior agreement linked to server manufacturer ZT Systems.
This substantial investment wasn’t a direct stock purchase in the open market. Instead, it is the result of warrants that Amazon received back in 2018 as part of a supply agreement with ZT Systems. These warrants gave Amazon the right to buy AMD stock at a specific price, contingent upon reaching certain purchasing milestones from ZT Systems.
The agreement essentially tied the value of the warrants to the amount of business Amazon conducted through ZT Systems, a key supplier of custom server hardware often used in cloud computing environments like Amazon Web Services (AWS). As ZT Systems purchased more processors and components from AMD to build servers for Amazon, Amazon earned the right to exercise more of these warrants.
Exercising these warrants has now translated into Amazon holding a stake in AMD valued at approximately $84.5 million, based on AMD’s stock price at the time the filing revealed the position. This development highlights the increasingly close relationship between major cloud providers and their underlying chip suppliers.
For AMD, this signifies continued strong demand for their server chips, particularly through major partners and their end customers like Amazon. For Amazon, holding a stake in a critical supplier like AMD could potentially deepen collaboration and ensure access to necessary hardware for their massive data center operations.
This move underscores the strategic nature of semiconductor supply chains for the largest tech companies and reveals how complex, multi-party agreements can lead to significant investment positions.
Source: https://www.datacenterdynamics.com/en/news/amazon-discloses-845m-stake-in-amd-due-to-zt-systems-deal/
