AMD to acquire data center optimization startup Pensando for $2B

AMD is in the chip business, and a big part of that these days involves operating in data centers at an enormous scale. As the scale increases, efficiency becomes paramount, and being able to maximize efficiency for specific workloads becomes more critical.

AMD announced today that it intends to acquire data center optimization startup Pensando for approximately $1.9 billion. The company’s products include a programmable packet processor that manages how workloads move through the hardware infrastructure, moving work off of the CPU whenever possible to increase performance. The company claims between 8x and 13x better performance than competitive products from companies like Nutanix, VMware, Cisco and others.

AMD chair and CEO Lisa Su said that the acquisition is about helping data center operators lower the cost of ownership by using software to squeeze out every last bit of efficiency.

“Today, with our acquisition of Pensando, we add a leading distributed services platform to our high-performance CPU, GPU, FPGA and adaptive SoC portfolio. The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level,” she said in a statement.

Pensando CEO and co-founder Prem Jain framed the deal in terms of being able to grow faster inside the larger organization than it could on its own. “Joining together with AMD will help accelerate growth in our core business and enable us to pursue a much larger customer base across more markets,” he said. Jain will join the data center solutions group at AMD when the deal closes.

Patrick Moorhead, founder and principal analyst at Moor Insight & Strategies, who keeps a close watch on the chip industry, said that this gives AMD a key set of software tooling inside data centers. “NPUs (neural processing units) and IPUs (infrastructure processing unit) perform network offload so that the server can provide a consistent level of performance for applications. While the solution requires chips and cards, the framework is all software defined,” he explained.

Overall, Moorhead said it’s a good acquisition for AMD, giving the company capabilities it lacked. “This gets AMD into the NPU or IPU market. It will compete with Intel, Nvidia and Marvell. Pensando has a very good array of enterprise and cloud customers. I like it,” he said.

The company launched in 2017 and has raised over $300 million from companies like Lightspeed Ventures, Qualcomm Ventures and Hewlett Packard Enterprise, according to Crunchbase data. Customers include Microsoft Azure, Oracle Cloud and Goldman Sachs.

The exact price of this deal will be worked out when they determine working capital and other adjustments from Pensando, according to AMD. Nonetheless, the deal is expected to close in the second quarter, subject to customary regulatory review.