AMD is buying server maker ZT Systems in a cash-and-stock deal worth $4.9 billion as the chipmaker strengthens its artificial intelligence capacity in its efforts to compete with Nvidia.

AMD plans to sell ZT Systems' server manufacturing business after the deal closes, with mergers and acquisitions in tech and elsewhere getting a closer look by the Biden Administration.

ZT Systems, based in Secaucus, New Jersey, is a privately held company that has designed and rolled out data center and storage infrastructure systems to cloud companies for more than a decade.

The transaction includes a contingent payment of up to $400 million based on post-closing milestones.

AMD is looking to bulk up its AI capabilities. Over the past year, the company has invested more than $1 billion to expand its AI ecosystem and strengthen its AI software capabilities.

The moves are part of an effort to better compete with tech giant Nvidia, which has experienced nearly insatiable demand for its chips to power artificial intelligence applications.

Once AMD's deal with ZT Systems closes, it will join the AMD Data Center Solutions Business Group. AMD said Monday that it will look for a buyer for its U.S.-based data center infrastructure manufacturing business.

The transaction, which was approved by AMD's board, is expected to close in the first half of next year.

Shares of AMD, based in Santa Clara, Calif., rose more than 3% before the market opened.

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