The US computer giant Nvidia has made its biggest-ever acquisition with a $6.9bn (£5.3bn) takeover of Israel’s Mellanox.
The deal represents a strategic shift towards cloud computing for Nvidia after a share crash at the end of last year triggered by the end of the cryptocurrency boom and slow sales of its computer game graphics chips.
Nvidia is best known for graphical processors, which are used in video and game production but have also become surprisingly proficient at intensive computing tasks such as cryptocurrency mining and artificial intelligence.
Its shares rose ten-fold between 2016 and last September amid booming interest in AI and the Bitcoin bubble, but lost half their value at the end of last year as cryptocurrency mining became unprofitable and sales of the graphics cards it sells to video gamers slowed, particularly in China.
Mellanox’s networking technology is used within data centres, the remote stacks of powerful computers used by companies to store and process vast amounts of information.
Its technology transfers data at high speeds within and between the data centres, which are increasingly in demand due to the rise of cloud computing services in which companies rent server space from Amazon, Microsoft and others.
Jensen Huang, Nvidia’s chief executive, said: “The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s data centers.”
The two companies have previously worked together on the world’s two most powerful supercomputers, the IBM-built systems used by the US government.
Nvidia reportedly beat away competition from Intel for the acquisition. Intel has also been leaning more heavily on its data centre business as the market for personal computers shrinks. It is by far the company’s biggest acquisition to date, worth almost 20 times the $367m it paid for modem company Icera in 2011.
Shares in Nvidia rose by more than 5pc on news of the deal.