After months of speculation, Mellanox found a suitor -- and it was a surprise, to say the least. GPU leader Nvidia snatched up the networking vendor for $6.9 billion, topping a rumored previous offer of $6 billion from Nvidia\u2019s nemesis, Intel.\nThe acquisition ends months of rumors of a suitor for Mellanox. Intel, Microsoft, and Xilinix were all reportedly bidding for the Israeli company, which specializes in high-speed networking.\n\nMellanox Technology was formed in 1999 by a former Intel executive and was a pioneer in the early adoption of InfiniBand interconnect technology, which along with its high-speed Ethernet products is now used in over half of the world\u2019s fastest supercomputers and in many leading hyperscale data centers.\nIt will also be far and away the biggest acquisition in Nvidia\u2019s history. The firm has grown entirely organically, and its few acquisitions have been relatively small, so this is somewhat out of character.\n"The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world\u2019s data centers," said Nvidia founder and CEO Jen-Hsun Huang in a statement.\n"Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant data center-scale compute engine," he added.\nAt $6.9 billion, that\u2019s almost half of Nvidia\u2019s $11.7 billion in annual revenue for 2018 and nearly wipes out the $7.4 billion in cash the company was holding. Mellanox\u2019s net profit for fiscal 2018 was $134 million, putting the purchase multiple of 52 times earnings.\n\u201cI am flabbergasted at what they paid for it. I don\u2019t get those ratios at all,\u201d said Jon Peddie, president of Jon Peddie Research, which follows the graphics market. \u201cTwo things we know. One, Jen-Hsun doesn\u2019t do dumb things and two, he doesn\u2019t throw money around. Those two tell me he has something figured out that I don\u2019t understand.\u201d\nPeddie speculates that this deal is designed to goose Nvidia\u2019s own interconnect effort, NVLink.\n\u201cIt\u2019s not cheap to design high-speed communications networks. It\u2019s as bad as designing a GPU. Mellanox can close the gap with their tech. My speculation is the next-generation GPU will get Mellanox next-gen communications stuck in it that is better than or equal to CXL,\u201d he said, in reference to the new high-speed interconnect announced by Intel and partners.\nJim McGregor of Tirias Research also believes it\u2019s a data center play.\n\u201cNvidia is trying to shore up its position in the data center because that\u2019s where it\u2019s still growing. It helps build out its strategy from a single box solution to a multi-box solution. So it doesn\u2019t have just the stuff in the box; it has the stuff to connect the boxes,\u201d he said.\nBut had an interesting tidbit to share. He was on a conference call with Huang, who said, \u201cThe only reason we acquired them is they called us.\u201d Mellanox said they were getting unsolicited offers and said they were pretty good, and they called Nvidia because the two companies have a long-standing relationship.\n\u201cI think it was a cultural exchange because they like working with Nvidia and preferred working with them. It sounds like both sides wanted it to happen but it was going to be expensive,\u201d\u00a0McGregor said.\nAnd if it gives Nvidia a chance to thumb its nose at its hated rival Intel, so much the better. The Silicon Valley is a fairly chill place of friendly competition, but you rarely see two companies that hate each other more than Intel and Nvidia.\nNvidia and Mellanox expect the deal to close by the end of this year. And Nvidia said "customer sales and support will not change as a result of this transaction."