Nvidia Nears Deal for Data Center Tech Firm Mellanox

(Bloomberg) -- Nvidia Corp. is nearing an agreement to buy Israeli chipmaker Mellanox Technologies, which would help it gain technology used to speed the flow of information around data centers, people familiar with the matter said.

The sale of Mellanox, which has a market value of about $5.9 billion, could be announced as soon as Monday, the people said, asking not to be identified because the deliberations are private. Nvidia is the leading bidder ahead of rivals including Intel Corp., though no final decision has been made and the outcome could still change, the people said.

Representatives for Nvidia, Mellanox and Intel declined to comment.

Speculation that it would be acquired has sent Mellanox’s stock surging. The stock gained as much as 14 percent in pre-market trading in New York on Monday. Shares of the company, which is based in Yokneam, Israel and Sunnyvale, California, have risen 66 percent from a low in October and 18 percent just this year through Friday.

Israeli newspaper Calcalist reported earlier Sunday that Nvidia and Intel were bidding for Mellanox, without saying where it got the information.

Hot Technology

Mellanox’s technology is crucial in transferring information from one component to another both within and between computers. The rate at which chips direct that traffic has become increasingly important as corporate computer networks and cloud service providers try to make sense of the growing flood of data being generated.

Multiple companies have an interest in adding such capabilities to their own array of products as they try to make themselves more attractive to major buyers of computer infrastructure, such as Alphabet Inc.’s Google, Amazon.com Inc.’s AWS and Microsoft Corp.’s Azure.

Nvidia is the largest maker of graphics chips used by computer gamers. The company has been pushing its technology into new areas, arguing that it has the best solution to the tougher requirements of processing data related to artificial intelligence. It’s already won over data center owners: The unit that serves that market has tripled sales in the last three years.

Mellanox’s revenue surged 26 percent in 2018, topping $1 billion for the first time.

Chipmaker Consolidation

The deal may signal a restart of consolidation in the $470 billion semiconductor industry which has been reshaped over the past five years as companies have increasingly combined to add scale amid rising costs and shrinking customer lists.

The transaction will still have to win approval from regulators. That process has become more complicated due to the U.S. trade stand-off with China. The U.S. is the world’s largest producer of chips, while China is the biggest consumer.

The Trump administration has blocked deals over concerns about China’s ambitions to acquire new semiconductor technology. China in turn has made it harder to secure its approval for transactions.

--With assistance from Yaacov Benmeleh.

To contact Bloomberg News staff for this story: Ed Hammond in New York at ehammond12@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.net;Olivia Zaleski in San Francisco at ozaleski@bloomberg.net;Nabila Ahmed in New York at nahmed54@bloomberg.net;Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Amy Thomson

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With assistance from Bloomberg