Nvidia’s New Chips

Nvidia announced its largest-ever acquisition today, offering $6.9 billion for data center chip technology maker, Mellanox.

Bloomberg is reporting that Mellanox beat out rivals that included Intel in a bidding process for the American-Israeli company, one which its founder, Jensen Huang, built in under three years by “persuading owners of data centers that his graphics chips are the right solution for processing the increasingly large amounts o information needed for artificial intelligence work, such as image recognition.”

The growing reams of data generated means work on AI and large databases needs to be split between multiple computers. Simply using a faster processor isn’t enough, Huang said. To deal with this, data centers in future will be built as though they are single giant computers “with tens of thousands of compute nodes,” requiring inter-connections that let them work in parallel. Nvidia will use its newly acquired technology to make those giant warehouses full of machinery more efficient and effective, he said.

The deal may signal a resumption of consolidation in the $470 billion semiconductor industry, which has been reshaped over the past five years as companies combined to gain scale while battling rising costs and shrinking customer lists.

The deal will require regulatory approval.

ZDNet’s take: 

Nvidia’s purchase of Mellanox for $6.9 billion will translate into a broader data center play for beyond the graphics and high performance computing markets.

• Nvidia’s rivalry with Intel hits a new stage.
• Nvidia gets more revenue diversification and data center sales.
• Mellanox gives Nvidia more entries into high performance computing and the data center.
• As artificial intelligence workloads become the norm, Nvidia with Mellanox be more an architecture play.

And SiliconANGLE spoke with analyst Patrick Moorhead about the deal:

“Both Nvidia and Mellanox are big in the high performance computing, machine learning, automotive, public cloud and enterprise data center markets, and could bring even more value to customers when [their technologies are] combined.”

“Scale and diversification is everything in the chip business, and Nvidia gets both with this acquisition,” added Holger Mueller, principal analyst and vice president of Constellation Research Inc. “It allows the company to scale and diversify from its existing graphics, gaming and AI use cases. Getting in the data center is vital with the overall move to the public cloud, so if this goes through, it means Nvidia will become more relevant for both executives and developers alike.”

The financial spin: Nvidia is paying a 15% premium to Mellanox’s Friday closing level, and indicated the purchase would be immediately accretive to earnings, margins and cash flows.