Nvidia’s $7 Billion Acquisition Of Mellanox Not To Be Blocked By China, Expects Nvidia CEO

The deal of the almost $7 billion takeover of Israeli chip designer Mellanox Technologies by Nvidia would is not expected to be opposed by the Chinese regulators, believes the company’s CEO Jensen Huang. He said this in a television interview with the news channel CNBC.

An important function for data center security networking and storage processing would be helped to be achieved by the deal, said Huang. The Chinese market is one of the largest for semiconductors in the world and both the companies have a sizeable business in the market. The situation and concerns for approval from Chinese antitrust authorities arise because of the current acrimonious trade war between the United States and China and Nvidia is an American US company.

There were worries that the merger could be blocked by Chinese antitrust authorities in their capacity of evaluating global deals because they are one of several international councils that doe such reviews.

“I think China is going to love it,” Huang said. ”[Mellanox is] the world’s best at connecting high performance systems, and we’ve been working with them for a long time.”

The prospect that the semiconductor manufacturer’s business would be directly impacted by the tariffs lodged between the world’s largest economies has not worried him, Huang said.

There is confidence about its supply chain within Nvidia even as the company is poised to make a mark in the business segment of gaming and artificial intelligence, Huang said.

“The vast majority of our technology and products are created in Taiwan, so we’re not affected largely by the tariffs,” he said.

For its fiscal first quarter of 2020, the earnings and revenue of Nvidia beat expectations of the market. But the company reported a consecutive second quarter of decline of revenues. During the company’s fiscal fourth quarter, there was a drop of 24 per cent drop in revenues year over year and during the company’s fiscal first quarter of the current year, there was a drop of 31 per cent year over year.

According to a consensus estimate of FactSet, the data center spending during Q1 came in at $634 million, nearly 5% lower than the $663.7 million.

For the current quarter, the company expects to generate revenues of $2.55 billion which would mark another quarter of year over year reduction of about 18 per cent.

The so called “hyper-scale spending pause” was pointed out by Huang and said the period where sale was reduced was longer than what the company had expected. Amazon’s and Alphabet subsidiary Google’s are among the companies which make use of chips from Nvidia from their cloud services.  The “hyper-scale” clients are firms that run online consumer services and cloud infrastructure.

“All of the data centers, the hyper-scalers, bought a little too much last year,” he said. “They bought too much in Q4. And so they’re gonna take a quarter or two to digest it.”

“I think that it is now forgone conclusion that ray tracing is going to define the next generation of computer graphics and so I’m very pleased with that,” Huang said. “The amount of computation that’s gonna be done in the cloud because of artificial intelligence is growing and is growing incredibly fast, arguably exponentially.”

(Adapted from CNBC.com)

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