Nvidia is all set to expand its data center chips in a $6.9 billion deal
Nvidia is approaching an agreement for purchasing Mellanox Technologies which is a supplier of computer networking products for around $7 billion in cash. The deal would be the largest acquisition ever made by Nvidia and would boost its business of making chips for data centers. Furthermore, Nvidia has outbid Intel in the auction for Mellanox and could announce a deal as early as possible. While Nvidia has focused its energies on computing, Mellanox works across Ethernet and other networking technologies.
The deal strengthens Nvidia’s position at market share
The deal underlines the ongoing merging of processors in the world and is a key move for Nvidia to strengthen its market share specifically in high – performance computing and supercomputers powering. Nvidia’s chip technology is quite popular in the video game and cryptocurrency markets, but a slowdown in China and a fading cryptocurrency craze have started to weigh on its sales and pressured the company to branch out into new markets. Plus, obtaining Mellanox would allow Nvidia to double down on its data center business. Nvidia, which has $91 billion in market capitalization, cut its fourth-quarter revenue estimate by half a billion dollars, due to weak demand for its China gaming chips and lower than expected data center sales.
The increasing need for chips in the market
Mellanox’s chips power high-speed networks, connecting servers which could help Nvidia for its data centers. Moreover, the company had a market capitalization about $5.9 billion at the end of trading. Besides that, its technology is crucial in transferring information from one component to other both within and between computers. As corporate computer networks and cloud service providers try to make sense of the growing flood of data being generated, the rate at which chips direct traffic has become increasingly important. The acquisition signifies a win for activist hedge fund Starboard Value LP, which is the company’s shareholder and comes in terms with the company over its board composition last year.