Nvidia Corp. (NVDA) designs, manufactures, and sells graphics processors and related software. The company was founded in 1993 as dozens of other companies competed to develop PC graphics chips 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. In the same year, Nvidia went public 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 first nine months of fiscal year (FY) 2022, Nvidia reported $6.7 billion in net income on revenue of $19.3 billion. As of Feb. 8, 2022, it had a market capitalization of $615 billion.
Nvidia aimed to expand into the smartphone market with its proposed acquisition of Arm Ltd., a U.K.-based leading phone chips developer owned by Japan's SoftBank Group Co. But the acquisition, valued at $40 billion when it was announced in 2020, ran into opposition from the U.S. Federal Trade Commission (FTC), which filed suit to block it, and drew increased regulatory scrutiny in the U.K.
On Feb. 7, 2022, Nvidia and SoftBank said they would not complete the transaction, with Arm now slated for an initial public offering (IPO). It was a notable setback for Nvidia, a company that has used past acquisitions to fuel its rapid growth.
The company has two operating segments: Graphics and Compute & Networking. The Graphics segment supplies GPUs for gaming, PC, enterprise workstation, and automotive applications. Compute & Networking includes data center and AI applications as well as Mellanox networking products.
Out of the crowded field of graphics chip companies in the 1990s, Nvidia is among the few still in business. Over the past 20 years, Nvidia has aggressively grown via acquisitions, allowing the company to expand its offerings. Through these deals, the GPU maker has been able to increase its sales and market share while diversifying its product and service offerings.
Below, we look in detail at four 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 GPUs 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 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 amid a downturn in the price of cryptocurrencies.
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 3dfx's assets, 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: Aug. 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 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.