- Nvidia on Monday announced it has agreed to buy Mellanox in a $US6.9 billion all-cash deal.
- 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 $US174 billion by 2023.
- Connectivity and bandwidth are increasingly becoming a bottleneck in the data-center market as the size of workloads increase, and the deal can provide a broad solution to overcome these challenges, according to Wall Street analysts.
- Watch Nvidia trade live.
Chipmaker Nvidia on Monday announced that it has agreed to buy Mellanox, a supplier of computer-networking products, in a $US6.9 billion all-cash deal. The offer, said to have beaten out one from rival Intel, is the largest in Nvidia’s history and will pay Mellanox shareholders $US125 a share – a 14.3% premium to Friday’s closing price.
“Intel losses market shares to Nvidia in the computing side,” said Jeremie Capron, head of research at ROBO Global, which runs a robotics and AI- focused exchange-traded fund under the ticker “ROBO.”
“The deal will give Nvidia an even bigger market share in the data-center market,” he said. According to Reportlinker data, the global data-center market is estimated to reach revenues of around $US174 billion by 2023, growing at a compound annual growth rate of 4%.
Connectivity and bandwidth are increasingly becoming a bottleneck in datacenter and artificial-intelligence applications as the size of workloads and datasets increases, according to Stacy Rasgon at Bernstein.
Rasgon has a “market perform” rating and a $US165 price target – 4% above where shares are trading on Monday.
And Shebly Seyrafi, an analyst at FBN Securities, agrees that the unit will provide broad solution sets to overcome bottlenecks in the data-center market.
“The deal will strengthen NVDA’s ability to offer datacenter-scale computing solutions optimised across computing, networking and storage, that can accelerate datacenter-scale workloads,” Seyrafi said in a note distributed Monday. “NVDA’s computing platform and MLNX’s interconnects will power over 250 of the world’s Top 600 supercomputers, and the two companies have every CSP and computer market as customers.”
Monday’s announcement will allow Nvidia to reduce its reliance on graphics processing units (GPUs).
In January, the chipmaker announced that declining macroeconomic conditions, particularly in China, affected demand for its gaming GPUs. Last quarter, Nvidia cited weakness due to an excess of mining GPUs for cryptocurrency amid a massive decline in the price of digital coins last year.
Nvidia was up 6% following Monday’s announcement and 20% so far this year.
Business Insider Emails & Alerts
Site highlights each day to your inbox.