Nvidia Corp. (NVDA) designs, manufactures, and sells graphics processors and related software. The company was founded in the early 1990s as dozens of other companies competed to develop graphics chips for the PC for video games and multimedia. One of Nvidia's major successes in its early years was the invention of the graphics processing unit (GPU) in 1999 through a series of products including its GeForce 256 GPU. In the same year, Nvidia went pubic in a stock offering. Today, the company's products power a wide variety of computers, tablets, gaming systems, and related technologies including artificial intelligence (AI) and virtual reality. For the fiscal year ended January 26, 2020, Nvidia reported $2.8 billion in net income on revenue of $10.9 billion. As of December 16, 2020, it had a market capitalization of $327.9 billion. The company has two operating segments: GPU and Tegra Processor.
Out of the crowded field of graphics chip companies in 1990s, Nvidia is one of the only firms still in business. For the past 20 years, Nvidia has aggressively expanded via acquisitions, allowing the company not only to grow its offerings but to eliminate potential rivals. Through these deals, the maker of graphics processing units has been able to sharply boost its sales and market share, and diversify its product and service offerings.
Below, we look in detail at 5 of Nvidia’s most important acquisitions. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes.
Mellanox Technologies Ltd.
- Type of Business: Cloud Computing and Networking
- Acquisition Price: $6.9 billion
- Date Purchased: March 11, 2019
Nvidia’s purchase of cloud computing and networking company Mellanox Technologies, an Israeli company, is one of its largest acquisitions. The deal is notable because it marked Nvidia’s first major expansion outside of graphics processing units and related technologies. It dramatically strengthened Nvidia’s competitive position in high performance computing because Nvidia and Mellanox power more than half of the world’s top 500 supercomputers. Nvidia founder and CEO Jensen Huang highlighted the two companies’ long-standing partnership and the dramatic emergence of AI and data science as reasons for the expansion. The Mellanox acquisition is seen as a major step to diversify by Nvidia. The decision to buy the cloud computing and networking company may have been partly spurred by falling demand for Nvidia’s core graphics products late in 2018 as a result of the dwindling cryptocurrency boom.
3dfx Interactive, Inc.
- Type of Business: Graphics Chips
- Acquisition Price: $70 million cash and 1 million shares of common stock for various intellectual property and inventory
- Date Purchased: (Completed April, 2002, Announced December, 2000)
3dfx was a graphics technology company that provided chips, boards, and software for use in video games, educational content, and business applications. Among the leading graphics technology companies in the late 1990s, 3dfx began to struggle amid declining customer reviews and delayed product releases. Nvidia’s purchase of its rival’s graphics chip business was part of a larger consolidation wave in the industry. In 2000, Nvidia announced that it would acquire most of the assets of 3dfx, including patents, brand names, and inventory related to the company’s graphics chip business. As part of the deal, Nvidia loaned money for working capital to 3dfx for the remainder of its businesses. However, by October of 2002, 3dfx’s remaining businesses had filed for bankruptcy protection.
- Type of Business: Graphics Chips
- Acquisition Price: $70 million
- Date Purchased: August 4, 2003
MediaQ, founded in 1997, was a potential rival to Nvidia and specialized in graphics and multimedia technology for mobile devices. Nvidia’s purchase of MediaQ in 2003 enabled it to extend its reach into the wireless mobile device market, including into product lines such as Microsoft Pocket PC and SmartPhone, Palm, and Symbian.
Hybrid Graphics Ltd.
- Type of Business: Graphics Software
- Acquisition Price: Undisclosed
- Date Purchased: March 22, 2006 (Announced)
Finnish graphics software developer Hybrid Graphics was founded in 1994. The company specialized in graphics technology for handheld devices. Nvidia purchased Hybrid Graphics in 2006 for an undisclosed sum as the industry rushed to consolidate. Just a few months after the Hybrid Graphics acquisition, Nvidia rival Advanced Micro Devices, Inc. (AMD) moved to acquire ATI Technologies, Inc., another graphics technology company with operations in handheld devices. At the time of Nvidia’s purchase, Hybrid Graphics developed and licensed graphic technology solutions for millions of handheld devices. It supplied major companies whose customers accounted for more than half of handheld devices globally.
- Type of Business: Chip Design
- Acquisition Price: $40 billion in cash and stock
- Date Purchased: Pending (Announced September 13, 2020)
Nvidia’s most recent major acquisition has been announced, but is yet to be completed. The purchase of Arm Ltd. of Cambridge, England, would be its largest deal ever. Arm develops, and licenses designs that other companies turn into chips. Nvidia announced the definitive agreement to purchase Arm from SoftBank Group Corp. on September 13, 2020, with the acquisition expected to be completed roughly 18 months later. In purchasing Arm, Nvidia would gain a major advantage in smartphone technology. The deal also has implications for Nvidia’s work in AI, cloud computing, self-driving cars and robotics, and other areas. Under the terms of the deal, Arm will retain its name and brand identity, and prior owner SoftBank will retain an ownership stake of under 10% in Nvidia. However, the deal is likely to face antitrust scrutiny from regulatory authorities around the world.