U.S. chipmaker, Nvidia announced on Monday that it will buy Mellanox Technologies, an Israeli chip company for $6.8 billion. The company aims to expand its data center business.
The deal was made after a competitive bidding process which witnessed the participation of many major players in the chip-making arena including Intel and Microsoft, according to a Reuters report. The deal was fixed for a premium of $14 per share which amounted to an all-cash offer of $125 per share.
Mellanox is based in Israel and the U.S. It produces chips and other hardware for data center servers that support cloud computing.
The deal is expected to close by the end of 2019. Analysts said there were no major regulatory hurdles that can affect the company.
Nvidia has been exploring more of networking and connectivity and Mellanox would add to the expertise of the company and will help in its expansion, stated the report citing sources. “But going out and buying an asset right now, immediately after the recent spate of guide downs may raise a few eyebrows. It will probably spark questions as to whether NVDA sees anything changing regarding the growth trajectory of their core data center business,” cited the source.
Nvidia slashed its fourth-quarter revenue guidance by half a billion dollars saying that the demand for gaming chips in the market was weak. The company was also affected by lower data center sales.
The new acquisition will give a competitive advantage to Nvidia as Mellanox promises high-performance computing. Mellanox works across numerous networking technologies including Ethernet. With the acquisition, the company is seeking to address the large scale demand for data centers.
“The emergence of AI and data science is fuelling skyrocketing demand on the world’s data centers,” said Jensen Huang, NVIDIA CEO. “Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine. [We aim to] unite NVIDIA’s accelerated computing platform with Mellanox’s world-renowned accelerated networking platform under one roof to create next-generation datacenter-scale computing solutions,” he added.
Image via Shutterstock