Internal document: AWS has planned lower spending on ZT Systems, a data-center-gear maker being acquired by AMD

• AWS plans to reduce spending on ZT Systems as it designs more data-center gear in-house.
• AWS has been designing more data-center components itself to improve efficiency.
• AWS remains the largest cloud provider, with significant capital expenditures planned for 2025.

Amazon Web Services plans to cut back on one key supplier as it designs more data-center components in-house.

AWS is scaling down its spending with ZT Systems, an AI-infrastructure company that AMD agreed this year to acquire, Business Insider has learned.

A confidential Amazon document from late last year obtained by BI estimated that AWS spent almost $2 billion last year on ZT Systems, which designs and manufactures server and networking products.

The document said some of AWS's "server and networking racks" were "transitioning" to a custom hardware approach where it designs this equipment itself. This change, the document said, has the "potential to impact spend" with ZT Systems.

Two current AWS employees familiar with the relationship also told BI recently that AWS was reducing spending on ZT Systems. One of the people said the cutback could happen in phases over a long period because ZT Systems is tightly integrated with AWS servers. They asked not to be identified because of confidential agreements.

An AWS spokesperson told BI that the company continued to have a business relationship with ZT Systems.

"Across AWS, we are relentless in our pursuit of lower costs and improved performance for customers, and our approach to our infrastructure is no different," the spokesperson said in an email. Spokespeople for AMD and ZT Systems didn't respond to requests for comment.

AWS has in recent years been using more homegrown data-center components, where it sees an opportunity to save costs and improve efficiency. This helps AWS because it doesn't have to buy as much from outside suppliers that mark up their offerings to make a profit. In turn, AWS can reduce prices for cloud customers. AWS now uses various custom data-center components, including routers and chips.

AWS is the world's largest cloud computing provider, so any change in its spending behavior is closely followed by the tech industry. AWS's spending on individual suppliers can fluctuate, and any one change doesn't mean AWS is pulling back on its data-center investments. In fact, Amazon is expected to spend $75 billion on capital expenditures this year, and even more in 2025, mostly on AWS data centers.

AMD agreed to acquire ZT Systems in August for $4.9 billion. The company is best known for designing and manufacturing server racks and other gear to help run data centers.

AWS could still send in-house designs to ZT to be manufactured. AMD has said it plans to sell ZT Systems' manufacturing business after the acquisition closes.

In recent months some AWS employees have discussed concerns about working too closely with ZT Systems since AWS and AMD offer similar AI-chip products, one of the people said.

AWS has for years been a close partner of AMD. The cloud giant sells cloud access to AMD CPUs but hasn't made AMD's new AI chips available on its cloud servers, partly because of low demand, an AWS executive who talked to BI recently said.

It's relatively common these days for big tech companies to design custom hardware. Nvidia, for example, acquired Mellanox for $6.9 billion in 2019 to offer its own data-center networking infrastructure. Other cloud giants, including Google, also design their own chips and networking gear.

AMD said in August that ZT Systems would help "deliver end-to-end data center AI infrastructure at scale."

"AWS and AMD work together closely, as we continue to make AWS the best place to run AMD silicon," AWS's spokesperson told BI.

Do you work at Amazon? Got a tip?

Contact the reporter, Eugene Kim, via the encrypted-messaging apps Signal or Telegram (+1-650-942-3061) or email (ekim@businessinsider.com). Reach out using a nonwork device. Check out Business Insider's source guide for other tips on sharing information securely.