ל-Nvidia יש יותר מ $7,000,000,000 במזומן & ההשקעות לטווח קצר. היא הציעה על מלאנוקס $7,000,000,000 וזכו במכרז. מלאנוקס היא חברה ממוקדת מרכז נתונים המספקת מתגי Ethernet ומעבדי מאיץ. הרכישה של מלאנוקס יכולה להגדיל את תחום מרכז הנתונים של Nvidia ב 697 מיליון דולר ברבעון. גידול שכזה יכול לעזור לקזז את ההפסד של החברה בעקבות ירידת הביקוש למעבדי הGeforce של כורי הקריפטו. I Know first חוזה שוק שורי מאוד בשנה הקרובה לחברת NVIDIA.
Reuters and other news sites reported that Nvidia (NVDA) outplayed Intel (INTC) in the bidding, Mellanox Technologies (MLNX). Nvidia allegedly offered $7 billion in cash for Mellanox. It will be Nvidia’s biggest acquisition. Mellanox had a market capitalization of $5.93 billion last Friday, March 8, 2019. Intel’s reported bid was only $6 billion.
Nvidia’s $7 billion payment is reasonable. Mellanox’s annual revenue is more than $1 billion. The 7x Price/Sales purchase price of Mellanox is not overpriced. Mellanox is also a profitable company. Its FY 2018 net income was $134.26 million.
(Source: Seeking Alpha)
Why Nvidia Needs Mellanox
Nvidia has more than $7 billion in cash but it needed new sources of growth. The demise of GPU-demand from cryptocurrency miners is why the Gaming and Datacenter business segments of Nvidia saw notable drops in QQ FY 2019. The chart below illustrates that lack of GPU (graphics processing units) from cryptocurrency miners is causing stagnation in Datacenter, and a drop in Gaming quarterly revenues.
My takeaway is that Mellanox’s $1 billion annual revenue can boost Nvidia’s Datacenter business. Spending $7 billion to get a growing $1 billion/year asset can offset the lost tailwind from Ethereum mining. GPU-based crypto-currency mining’s death last year is why NVDA got super oversold.
Mellanox develops and sells Ethernet switches, network cards, System-on-Chips, and network processors/accelerators for high performance computing platforms (HCP). Nvidia can now augment its Datacenter revenue/income by bundling its data center GPU accelerators with Mellanox-branded InfiniBand/VPI adapters, Ethernet switch, and BlueField network processors.
Mellanox’s InfiniBand adapters are attractive to Nvidia because of its GPUDirect RDMA. This application program interface or API gives access to HCA to read/write memory data buffers. GPUDirect RDMA means server applications can utilize peer device computing power without the need to copy data to host memory.
Nvidia is a co-creator of GPUDirect. This partly explains why Nvidia wanted to win the auction for Mellanox. Mellanox is a necessity toward growing the total addressable market of Nvidia’s Datacenter business segment.
The Global Ethernet Switch Market Is Growing
Mellanox is also a small but rising player in the growing Ethernet switch industry. As of Q3 2018, IDC estimated that sales of Ethernet switch has reached $7.3 billion/year, +8.1% Y/Y. Nvidia is therefore buying a company that’s involved in a growing industry. Mellanox is an Israeli company. It can benefit from the anti-Huawei witch hunt of the U.S. and its allies.
Going forward, Nvidia could become a serious challenger to Cisco (CSCO), Juniper (JNPR), and Arista (ANET). My fearless forecast now is that Nvidia will use its dominant Tesla server accelerator GPUs to win more customers for Mellanox Ethernet switch, Ethernet cards, and network processors. Cisco sells servers, routers, and Ethernet switches. Nvidia can also do this bundled type of marketing.
Going forward, U.S. and its allies can ask government agencies and government-owned companies to replace their Huawei-made networking hardware and telecom equipment. Nvidia can step and offer its Mellanox products to government agencies as worthy replacements for Huawei products.
The U.S. government has already warned that multinational companies that use Huawei products will have a harder time dealing with it. Trump and his minions are telling large corporations to also replace and ban Huawei products if they want to safeguard their business relationship with the U.S. government.
Buying an Ethernet switch-selling company is therefore timely and judicious.
The upcoming acquisition of Mellanox Technologies is a compelling reason to go long NVDA. Nvidia’s data center business will likely become a $4 billion/year segment after the Mellanox acquisition is completed. As of last year, the Datacenter segment is generating less than $2.7 billion/year in revenue. This is in spite of the lack of data center GPU challenge from Advanced Micro Devices (AMD).
My takeaway is that Nvidia needs to grow beyond its GPU products to grab a bigger share of the fast-growing $61.59 billion/year data center equipment market. GPU accelerators are just a small part of the total data center equipment market. Buying Mellanox right now when there is strong anti-Huawei sentiment is brilliant. It can help Nvidia quickly become a major vendor of data center-centric Ethernet products.
I Know First has a high predictability score (0.75) for Nvidia’s 1-year market trend prediction. It is therefore worth going long on NVDA because I Know First has a very bullish 12-month signal for Nvidia’s stock, 228.83.