Nvidia is competing for Mellanox with Intel Corp, which has already offered $6 billion for the Israeli company, Calcalist said.
Founded in 1999, Mellanox Technology is one of the world's leading producers of high-speed networking components - including silicon - using Ethernet and InfiniBand standards. With its ownership of Mellanox, Nvidia hopes to go forward and "optimise datacenter-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilization and lower operating cost for customers." .
Jensen Huang, CEO of Nvidia, said the acquisition of Mellanox is aimed at addressing "holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine".
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The Nvidia-Mellanox deal is a further consolidation in the world of chipmakers.
The deal will expand the offerings of Nvidia, which produces chips and other technologies for video games, facial recognition systems and autonomous vehicles. Xilinx is also a fabless semiconductor company that is apparently interested in snatching up its fellow chipmaker. Mellanox will pay a $350 million termination fee to Nvidia if it accepts a rival offer. The company, is based in Israel and the United States, had a market capitalization at the end of trading on Friday of about $5.9 billion. Chips that direct that traffic have become increasingly pivotal as corporate networks and internet-based cloud service providers try to make sense of the plethora of data.
A chip expert says the deal will give Nvidia an even bigger market share in the data-center market, which Reportlinker says will reach revenues of around $174 billion by 2023.
Credit Suisse and JP Morgan advised Mellanox, while Goldman Sachs advised Nvidia.