Advanced Computing in the Age of AI | Tuesday, June 25, 2024

Nvidia Wins Mellanox Stakes for $6.9 Billion 

The long-rumored acquisition of Mellanox came to fruition this morning with GPU chip maker Nvidia’s announcement that it has purchased the high-performance network interconnect maker for $6.9 billion – outbidding a reported $6 billion offer by Intel in late January.

Reports surfaced yesterday on the Israeli technology news site CTec, that Nvidia had entered the Mellanox bidding, which reportedly has included Xilinx, Broadcom, Microsoft, among rumored other companies, along with Intel.

In its press announcement, Nvidia (FY 2019 revenues: $11.72 billion) said it will acquire all Mellanox stock for $125 per share. Mellanox, whose Ethernet and Infiniband interconnects are used in more than half of the world’s most powerful publicly listed HPC systems, reported 2018 revenues of $1.09 billion. Together, NVIDIA’s computing platform and Mellanox’s interconnects power more than 250 of the world’s TOP500 supercomputers; customers include the major cloud service providers and computer makers.

Nvidia's Jensen Huang (source: Nvidia)

“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 Jensen Huang, founder and CEO of NVIDIA. “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. 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. I am particularly thrilled to work closely with the visionary leaders of Mellanox and their amazing people to invent the computers of tomorrow.”

“We share the same vision for accelerated computing as NVIDIA,” said Eyal Waldman, founder and CEO of Mellanox. “Combining our two companies comes as a natural extension of our longstanding partnership and is a great fit given our common performance-driven cultures. This combination will foster the creation of powerful technology and fantastic opportunities for our people.”

Early response from the industry analyst community has been positive.

“This exciting transaction would unite two HPC industry leaders and strengthen the combined company’s ability to create data-centric system architectures for the convergence of the HPC and hyperscale markets around AI and other HPDA tasks,” said Steve Conway, COO and Research SVP at Hyperion Research. “To maximize that opportunity, it’s important that the company avoid integrating too tightly around their own solutions. Our studies consistently show that buyers want systems to support a wide and growing variety of processors and other components."

"Nvidia’s acquisition of Mellanox should be a synergistic move between the two companies," said Patrick Moorhead, president and principal analyst, Moor Insights & Strategy. "Both NVIDIA and Mellanox are big in the HPC, ML, automotive, public cloud and enterprise datacenter markets which could bring even more value to customers when combined. NVIDIA GPUs need the fastest I/O and Mellanox is one of the best at it.

Eyal Waldman, president/CEO, Mellanox (source: Mellanox)

The companies have a record of joint collaborated , such as their contributions to the world’s two fastest supercomputers, the U.S. Department of Energy’s Sierra and Summit systems built by IBM.

Post close, the transaction – for which Goldman Sachs served as financial advisor to Nvidia – is expected to be immediately accretive to NVIDIA’s non-GAAP gross margin, non-GAAP earnings per share and free cash flow, according to Nvidia. The company said it intends to fund the acquisition through cash on its balance sheet. The transaction has been approved by both companies’ boards of directors and is expected to close by the end of CY  2019.

Rampant rumors of a Mellanox acquisition has helped run up the company's stock price from a low of $66 last October 24th to today's price of $119, up 8.5 percent on today's trading as of this writing.

NVIDIA will conduct a webcast at 5:30 a.m. PT today to discuss the transaction.