NVIDIA Acquires Mellanox In Big $6.9B Data Center Power Play

Graphics specialist NVIDIA on Monday announced it is acquiring Mellanox, a maker of high performance computing (HPC) chips, for $125 per share in cash. That values the deal at around $6.9 billion, making this NVIDIA's biggest transaction since it was founded two and a half decades ago.

Mellanox is a major player in the data center space. The company pioneered the InfiniBand interconnect technology that is commonly used in HPCs found in data centers, and is a major supplier of end-to-end Ethernet solutions.

"The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s data centers," said Jensen Huang, founder and CEO of NVIDIA. "Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant data center-scale compute engine."

"We’re excited to unite NVIDIA’s accelerated computing platform with Mellanox’s world-renowned accelerated networking platform under one roof to create next-generation data center-scale computing solutions. I am particularly thrilled to work closely with the visionary leaders of Mellanox and their amazing people to invent the computers of tomorrow," Huang added.

NVIDIA and Mellanox

NVIDIA and Mellanox are no strangers to each other. The two companies have a long history of collaboration, and the fruits of their efforts can be found in the two fastest supercomputers in the world, Sierra and Summit, both operated the US Department of Energy. Because of this history and shared interest in data centers, NVIDIA envisions being able to seamlessly integrate Mellanox into the fold.

It's been reported that Intel was also interested in acquiring Mellanox, but lost out to NVIDIA in a bidding war. As a parting shot, NVIDIA once again made it a point to say "Moore's Law has ended" in an FAQ it released in conjunction with the announcement.

To casual observers, it may seem odd that a graphics chip maker made its biggest investment to date on a company that produces data center technologies, but the acquisition is aligned with NVIDIA's long-term trajectory. According to NVIDIA, there is an "enormous market opportunity" for computing and high-speed networking, with the total addressable market being worth $60 billion or more by 2023.

NVIDIA called this a "financially attractive" deal, one that will foster the next-generation of HPC and artificial intelligence (AI) platforms for hyperscale and enterprise data centers, as well as supercomputing centers.

Shares of Mellanox shot up nearly 9 percent in early morning trading, while NVIDIA's are up slightly following the announcement.