In an attempt to expand its data center business, GPU maker Nvidia has closed the deal to acquire Israeli Data center Networking firm Mellanox in an all-cash deal valued at $6.9 billion. Many analysts and experts believe that Nvidia managed to beat rival and fellow American chip-manufacturer Intel in the buyout.
33% of Nvidia’s total revenue is sourced from data centers and the acquisition of Mellanox will make it the biggest vendor in the industry. Mellanox, based in Israel and the United States, primarily deals in the manufacture of chips and other necessary hardware that goes in a data center server, which in-turn powers cloud computing. The technology used by Mellanox has played a crucial role in the transfer of data between components, within and between computers. Their chips are used in both Summit and Siera supercomputers, which are powered by Nvidia’s GPUs. Consequently, it will further strengthen Nvidia’s claim of having unrivaled solutions to process data for artificial intelligence.
“The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s datacenters,” 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 datacenter-scale compute engine.
Stacy Rasgon, who serves as an analyst at Bernstein says that the successful acquisition of Mellanox will further enunciate Nvidia’s cause of venturing more into network solutions by equipping them with their Mellanox’s expertise.
The semiconductor industry, which amounts to a mammoth $470 billion, has been showing signs of consolidation since 2014, owing to increasing costs and lessened demands.
However, this deal could face the backlash of the trade war between the U.S. and China, as the Trump administration has previously been blocking deals like these. The chip industry is fractured by this standoff as America is the largest producer of chips and China is the biggest consumer. This deal made the Mellanox shares rise by more than 8 percent and the Nvidia shares rose by 4 percent on Monday.