Initial reactions to the NVIDIA acquisition of Mellanox

One of my favorite things is waking up on a Monday morning (not after daylight savings time), grabbing an iced coffee and browsing the internet for tech stories.   Yesterday, I hit the mother-load… a major tech acquisition.  I’m a little late to say this is breaking (better than the last one I published) and I promise the next time there is a major acquisition that effects the data analytics and AI space, I will release a blog on the same day.  Here goes my take on what happened yesterday.

Yesterday, Nvidia announced that they had finalized a deal to buy Mellanox in a deal worth roughly $6.9B.  For those of you who aren’t familiar with Mellanox, they are an Israeli based data center solutions company that is a leader in end-to-end Ethernet and Infiniband smart interconnect solutions and services.  In short, Mellanox provides interconnect solutions that provide some of the highest throughput and lowest latency in the data center… an important ingredient when you are talking about data-intensive workloads like Artificial Intelligence. 

Here are some of the details of the acquisition:

  • NVIDIA will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9 billion
  • $125 per a share marks a 14% premium over Mellanox’s share price on Friday’s close
  • Barring any regulatory hurdles, the deal is expected to close by end of year

My initial thoughts:

  1. To me, this seems like a great strategic move for Nvidia and one that can further entrench them into the Artificial Intelligence world.  There really isn’t a whole lot of overlap between Nvidia GPU and Mellanox interconnect portfolio so it seems like long term it could bring a lot of synergy to the portfolio. 
  2. Nvidia isn’t just doubling down on the HPC/AI space they are quadrupling down.  Between Nvidia and Mellanox, they now power over 250 of the world’s top 500 supercomputers. It seems that adding Mellanox to the Nvidia portfolio will allow Nvidia to drive GPUs into accounts that were Mellanox customers and transversely drive Mellanox into accounts that have embraced GPUs.
  3. It looks like Intel was among the other bidders (Microsoft was another) with a $6 billion dollar bid.  This seems like Nvidia just pulled off a major power move against its leading competition. 
  4. The data center is Nvidia’s fastest growing business and Mellanox only adds to the revenue stream.  Short term, I bet the two products will be fairly separated but I wonder if in the future, Nvidia could incorporate Infiniband switches into the DGX and create a full hardware stack for AI. 
  5. GTC is only a couple weeks away, I am excited to see how they will incorporate Mellanox into the show and if they will have any concept releases.

Overall, I think this was a great move for Nvidia.  They had a rough Q4 and the addition of the Mellanox portfolio only gives them more entries into accounts.  The real value of this acquisition will come if they can integrate networking into their current enterprise portfolio of GPU hardware. This space is only heating up!

What do you think of the acquisition?  What do you think Intel will do next?

Let me know in the comments! 

Brett