"We're excited to unite Nvidia's accelerated computing platform with Mellanox's world-renowned accelerated networking platform under one roof to create next-generation datacenter-scale computing solutions", said Huang. Imagine the possibility of combining NVLink - Nvidia's high-speed protocol for intra-GPU communication - with Mellanox's networking and server products.
"We want to double down on data centres", he said. Xilinx is also a fabless semiconductor company that is apparently interested in snatching up its fellow chipmaker.
Nvidia management comments on a conference call that discussions to buy Mellanox were relatively recent suggested that they may have calculated that Mellanox as part of Intel would have hindered Nvidia's long-term growth, Rosenblatt Securities analyst Hans Mosesmann said.
The deal will help Nvidia to better compete in the data centre market, which now accounts for around a third of its sales.
This high-profile interest is hardly surprising; Mellanox is renowned for its high-performance computing and networking tech and makes adapters, switches, and chips for InfiniBand and Ethernet network devices that are used in more than half of the world's publicly-listed fastest computers.
The game plan for Nvidia is to use Mellanox to optimize data center workloads across compute, networking and storage.
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Nvidia has invested heavily in its datacentre and AI technologies over the years and acquiring Mellanox will be an extension of that. Mellanox will pay a $350 million termination fee to Nvidia if it accepts a rival offer.
Reuters reported about the deal on Sunday.
The headlining transaction has already been approved by both companies' boards of directors and is expected to close by the end of calendar year 2019. It could, however, face some regulatory hurdles in China, where Mellanox has major customers such as Alibaba and Baidu.
Chinese regulators may require Nvidia to promise that Mellanox's technology will continue to work with chips from other makers, said Aaron Glick, a strategist with Cowen Inc.
Credit Suisse and JP Morgan advised Mellanox, while Goldman Sachs advised Nvidia.