Mellanox acquisition gives Nvidia foothold in Israel

Nvidia CEO Jensen Huang Photo: Reuters Rick Wilking
Nvidia CEO Jensen Huang Photo: Reuters Rick Wilking

Chip industry sources: The deal brings a major new high-tech investor into Israel.

"Except for Intel, no artificial intelligence giant on this scale has ever before come to Israel, made such a completely strategic move, and put so much money here. There are simply no negative aspects to it," a local analyst who has been closely following Mellanox for many years told "Globes" yesterday.

"Nvidia is one of the world's leading players in computer technology, with a $100 billion market cap. This player, which has never before had a presence in Israel, has now invested in founding a development center and in the developers community, and has acquired a very important Israeli technological asset. Nvidia will now want to strengthen it, enlarge it, and give it an even more central location than it has now," the analyst commented.

The analyst is not alone. The acquisition of Mellanox, the Israeli producer of communications components for data centers, by Nvidia, the manufacturer of graphic chips that has become one of the most important artificial intelligence (AI) companies, has won universal praise, with optimistic forecasts of the deal's possible effects on the local high-tech sector and its accompanying startup scene.

"This is a kind of matriculation certificate," PDC CEO and Applied Materials Israel president Ofer Greenberger said. Greenberger's company develops chip production control systems; it is Applied Materials' largest R&D center outside the US. "They used to say that Israel was unable to grow large companies, and that exits were always fast," Greenberger says. "Here you have it - a 10 year-old company that has been through ups and downs and many generations of technology is gaining global recognition for Israeli technology. It's a message for the younger generation that there is finally recognition and a chance."

Greenberger praises Mellanox CEO Eyal Waldman, saying, "While investors in the company wanted fewer investments and more profits, Waldman was right, because he was unwilling to cut investments. It eventually turned out that what Mellanox developed in recent years was definitely part of the reason for this acquisition. It's a synergetic addition to Nvidia's portfolio, which has to add products that will give it an advantage over the processors of its rivals and those that Amazon, Microsoft, and Google will develop."

As for the message of the deal for the sector, Greenberger says, "The important reinforcement is for the communications sector in the AI era and for data centers in the cloud computing era."

A message for all the skeptics

"The fact that Nvidia, a company in the forefront of the hottest segments in the world, is entering Israel is very important. The fact that it is buying one of the jewels of Israeli high tech is also super-important. Kudos are due to Eyal Waldman and Israeli high tech," says Tal Slobodkin, managing partner of StageOne Ventures, which invested in Israeli startup NeuroBlade, founded in 2016, a company that develops chips for AI. He explains, "Nvidia is a hardware company that manufactures equipment at a very high level and competes with the world's biggest players. The whole here is greater than the sum of its parts - Nvidia took this step because it constantly tries to think about the next directions for its growth, where it can continue developing, and what will happen in its competition with Intel."

Slobodkin says that a local acquisition by such a concern, which constantly strives to grow and aims at the very top, will substantially improve Nvidia's ability "to be involved in things happening here. This step introduces another potential buyer to Israel, which is making a big bet on the country and putting its stamp of approval on the local scene that produced a leader in an international category."

"When a company like Nvidia buys such a company in Israel," Slobodkin says, "It gives the market a signal that it is looking for innovation in areas of interest to it. This delivers a message to all the people that questioned whether there was a need to found chip companies. Here is proof that there are real and sizeable buyers in the world looking for innovation in the chips and hardware field, and they are coming here to buy this."

Slobodkin says that this is good news specifically for companies like NeuroBlade, adding, "Our people will always circulate around Nvidia, whether because of competition or cooperation. The fact that they will be an important player in Israel is extremely relevant to them."

Dell Technologies Capital VP and managing director Yair Snir sums up by saying, "Nvidia's entry into Israel on such a large scale is definitely a welcome development. Together with the declaration that Amazon will develop its AI chip in Israel, the Mellanox deal is another important step on the way to making Israel a dominant global player in AI and the hardware on which it will be run."

Published by Globes, Israel business news - - on March 12, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Nvidia CEO Jensen Huang Photo: Reuters Rick Wilking
Nvidia CEO Jensen Huang Photo: Reuters Rick Wilking
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