
Nvidia has outbid Intel and other tech companies to buy Israeli data center solutions vendor Mellanox in a deal worth $6.9 billion.
The Santa Clara, Calif.-based chipmaker announced the deal on Monday, saying that the combination of Nvidia's graphical processing units and Mellanox's networking component products will create important advances in the world of high-performance computing.
[Related: Nvidia CEO Expects Return To 'Sustained Growth' After 'Turbulent' Q4]
"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," Jensen Huang, founder and CEO of Nvidia, said in a statement. "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."
Nvidia shares were up 1.7 percent before the market opened Monday.
The GPU maker plans to buy Mellanox by paying $125 per share, a 14 percent premium over the company's share price of $109.38 on market close Friday. Mellanox's stock price soared 8.66 percent in pre-market trading to $111.85 per share on Monday morning.
The deal is expected to close by the end of the year, subject to regulatory approvals and other customary closing conditions, including approval by Mellanox shareholders.
A competitor and customer of Intel, Mellanox sells a variety of data center products ranging from ethernet switches, chips and InfiniBand intelligent interconnect solutions to servers, storage and hyper-converged infrastructure. It received a 5-star rating in CRN's 2018 Partner Program Guide.
The deal is likely to be seen as a power move against Intel, which had reportedly offered up to $6 billion for Mellanox earlier this year. The chipmaker is one of Israel's largest employers and has repositioned itself as a data-centric company, pointing to a $300 billion market that includes servers and 5G base stations.
In Nvidia's press release announcing the Mellanox deal, the company took a swipe at CPUs and Moore's Law, the law that explains advances in computer chips named after Intel co-founder Gordon Moore.
"While computing demand is surging, CPU performance advances are slowing as Moore’s law has ended," Nvidia said in a statement. "This has led to the adoption of accelerated computing with NVIDIA GPUs and Mellanox’s intelligent networking solutions."
Intel did not immediately respond to a request for comment.
Other companies that reportedly made bids for Mellanox include data center specialty chip maker Xilinx, which offered $5.5 billion, and Microsoft, which had hired Goldman Sachs to negotiate a deal.
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