Intel and NVIDIA compete in the data center market
Previously, we learned that many tech giants, including Intel (INTC) and NVIDIA (NVDA), are interested in acquiring Mellanox (MLNX) because of its InfiniBand networking technology, which is a critical component in the HPC (high-performance computing) space.
Both NVIDIA and Intel operate in the HPC market, but they offer different products.
While Intel is a leader in the server CPU market, NVIDIA is a leader in the server GPU (graphics processing unit) market. NVIDIA’s GPUs enable servers to handle AI and data analytics workloads, which have given rise to a new era of GPU computing. Intel is looking to tap the AI data center market and is, therefore, building its own discrete GPU.
NVIDIA’s data center business
The data center business is NVIDIA’s second-largest business after gaming, and it contributes ~25% to the company’s revenue. It’s NVIDIA’s fastest-growing business, growing in the triple digits in fiscal 2018 and in the double digits in fiscal 2019, which ended on January 28, 2019.
In the fourth quarter of fiscal 2019, NVIDIA’s data center revenue fell 14% sequentially for the first time in over three years as rising economic uncertainty made data center customers cautious across verticals, markets, and geographies. Several customers paused their capital spending temporarily, and because of this, NVIDIA couldn’t close several deals in January.
NVIDIA is banking on the data center space to drive its future growth. It doesn’t come as a surprise that the company is expanding its data center business beyond GPUs and into networking. The fastest way to expand its data center offerings is through acquisitions, and Mellanox fits the bill. Unlike Intel, NVIDIA doesn’t have a networking portfolio, so the NVIDIA-Mellanox deal is likely to be approved by regulators.
However, a CNBC article stated that Bernstein analyst Stacy Rasgon believes NVIDIA’s acquisition of Mellanox immediately after reporting weak data center growth could spark questions about the future growth trajectory of its core server GPU business.