NVIDIA Set for Mellanox Acquisition Worth Nearly $7B

Chipmaker NVIDIA has recently made an offer to acquire its smaller peer Mellanox Technologies in a deal that is likely worth more than $7 billion, cash.  The deal is not only notable because it is the biggest such acquisition for NVIDIA, but more importantly edged out Intel’s previous offer of $6 billion. None of the parties involved with this negotiation have been willing to comment on the situation as yet. 

Mellanox is best known for high-performance computing and networking technology, so it is an obvious choice for both Intel and NVIDIA. But while the details about the deal have not been clarified, it would not be difficult to discern how this acquisition would be beneficial for NVIDIA.  For one, Mellanox could help improve server and supercomputer performance, particularly when you would need multiple processors collaborating in tandem: something that is common to emerging self-driving car technology. It could also ensure faster connections between multiple GPUs in gaming PCs and workstations. 

Intel’s interest in Mellanox, however, might have been less of a means for direct advance and more of a defensive strategy. You see, both Mellanox and Intel possess decent market share for InfiniBand technology that is common to computer cluster linking.  Thus, if Intel were to acquire its direct peer—in this regard—it would prevent NVIDIA (and others) from having access to this technology. 

That in mind, NVIDIA Chief Executive Jensen Huang comments “The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s datacenters. 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”

As such, NVIDIA’s $125-a-share offer for Mellanox puts the price at about $6.9 billion and reflects a 14.3 percent premium over the chipmaker’s closing price of $109.38, on Friday.  And this price also reflects NVIDIA’s biggest acquisition in the company’s twenty-year tenure as a public company.  Actually, the company has never spent more than $400 million—in an entire year—for acquisitions.  Its most recent substantial acquisition might have been $70 for former rival 3DFX, in 2002.

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