Stein (Bull): "The acquisition seems defensive to us, because (1) it is announced during a time of weak demand, and (2) we believe the strategic fit with other speculated bidders (Intel & Xilinx) may have threatened Nvidia somewhat. Still, these factors don't eliminate the strategic and financial fit."
"Strategically, Mellanox affords Nvidia a more prominent role with data center customers. It expands Nvidia's datacenter total addressable market from $50 billion to $61 billion, gives Nvidia control of the prominent vendor of Infiniband networking chips (which Nvidia already sells in some of its own products), and gives Nvidia control of some already jointly developed technology, like GPU Direct. Financially, we anticipate the transaction will increase Nvidia’s EPS by ~9% in 2020."
Davuluri (Bear): "For Nvidia, the rationale of acquiring Mellanox is to make the process of getting the data from the network to Nvidia's GPUs as quickly and as greater of magnitude as possible."
"That may be the case in the longer term. However, rival Intel is not sitting idle. Intel has also been developing similar technologies for the past decade. Intel made quite a bit acquisitions themselves to have similar Etherum and InfiniBand technologies. I don't think Intel has left out in the cold just because it wasn't able to make this deal."
Davuluri concluded that Nvidia's $6.9 billion bid that pays Mellanox shareholders $125 a share — a 14.3% premium to the prior day's closing price — was a little bit more aggressive than what he thinks is reasonable.