Chipmaker Nvidia (NASDAQ:NVDA) said on Monday it will buy Israeli chip designer Mellanox Technologies (NASDAQ:MLNX) for $6.8 billion in cash, a deal that would help the U.S. chipmaker boost its data center business.
The offer price of $125 per share represents a premium of 14% to Mellanox's Friday close.
Mellanox, based in Israel and the U.S., makes chips and other hardware for data center servers that power cloud computing. The company had a market capitalization of about $5.9 billion at the end of trading on Friday.
Nvidia has been pushing more into networking and connectivity with its own tailored solutions and Mellanox would bring further expertise along these lines.
The deal is being announced after a competitive bidding process where other chipmakers such as Intel (NASDAQ:INTC) and Xilinx (NASDAQ:XLNX) also bid for it, according to sources familiar with the matter
Data center revenue accounts for nearly a third of Nvidia's sales. The chipmaker has grown at a rapid pace in the past few years under CEO Jensen Huang, but a slowdown in China and a fading cryptocurrency craze have started to weigh on its sales in recent quarters.
"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 Huang. "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."
Shares in Nvidia took on $2.53, or 1.7%, to $153.17, while those in Mellanox skyrocketed $9.39, or 8.6%, to $118.76
