4 Companies Owned by Nvidia

Cloud computing, graphics chips, and software

Nvidia (NVDA) is one of the largest semiconductor companies in the world. It designs, manufactures, and sells graphic processors and related software. The company is credited with inventing the graphics processing unit (GPU) that is used in computers and other electronics. Originally a private company, Nvidia is now a publicly-traded company. Its products have been fundamental to powering artificial intelligence models and a variety of computer devices. From Google to Meta, many tech giants use Nvidia's chips for their AI applications and large language models.

The company is among the few graphic chip companies from the 1990s that is still in business. Over the years, Nvidia grew aggressively 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.

Key Takeaways

• Nvidia is an American technology company that designs, manufactures, and sells semiconductor chips and graphics processors, along with other software.
• The company invented the GPU, which is used in computers and other electronics.
• Nvidia has relied heavily on acquisitions to keep its place in the industry.
• The major acquisitions include Mellanox Technologies, 3dfx Interactive, MediaQ, and Hybrid Graphics.
• Nvidia's proposal to acquire U.K.-based semiconductor producer Arm for $40 billion was terminated after the FTC blocked the deal, but it still holds a $147.3 million dollar stake in the company.

Nvidia: An Overview

Nvidia is headquartered in Santa Clara, California. The company was founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem. This was as dozens of other companies competed to develop PC graphics chips for video games and multimedia. As noted above, the company invented the GPU in 1999, which is one of its major successes in its formative years.

Nvidia has emerged as a critical player in powering artificial intelligence and virtual reality. These newer forms of technology can be used in a number of applications, including:

• Chatbots
• Coding software
• Robotics
• Medical imaging
• Supply chain management (SCM)
• Gaming
• Cinema
• Product design and development
  

Financials

The company went public on Jan. 22, 1999, issuing 3.5 million shares at $12 per share. Nvidia raised about $42 million during its initial public offering (IPO) on the Nasdaq. As of April 15, 2024, the company's market capitalization was $2.17 trillion.

For the 2024 fiscal year (ending Jan. 28, 2024), Nvidia reported:

• Revenue of $60.9 billion compared to $27.0 billion in the previous year
• Gross profit of $44.3 billion compared to $15.4 billion in the previous year
• Net income of $30.0 billion compared to $4.4 billion in the previous year

The significant increase in revenue is due to surging demand for chips that underpin artificial intelligence systems amid rapid technological advancements, leading to record annual revenues for the year.

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, its largest revenue driver, includes data center and AI applications as well as Mellanox networking products.

Note

Nvidia's fiscal year runs from February through January.

Mellanox Technologies

• 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 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 chief executive officer (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 acquisition of Mellanox was 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.

Important

The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes. 

3dfx Interactive

• Type of Business: Graphics Chips
• Acquisition Price: $70 million cash and one million shares of common stock for various intellectual property and inventory
• Date Purchased: April 2002 (announced in 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 2002, 3dfx’s remaining businesses filed for bankruptcy protection.

MediaQ

• 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

• 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's rival, Advanced Micro Devices (AMD), moved to acquire ATI Technologies, 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.

Regulatory Challenges Prevent Arm Acquisition

The company also tried to expand into the smartphone market with a proposal to acquire Arm Ltd. for $40 billion. The company is a U.K.-based phone chips developer owned by Japan's SoftBank and its chips are found in 99% of the world's smartphones. The announcement was made in September 2020 and Softbank agreed to retain a stake in ARM of no more than 10%.

The announcement didn't come without challenges. The U.S. Federal Trade Commission (FTC) filed suit to block the acquisition to "preserve competition" in the computer chip market. The agency called it the "largest transaction in the history of the semiconductor industry." The proposed deal also drew increased regulatory scrutiny in the U.K.

On Feb. 7, 2022, Nvidia and SoftBank canceled the transaction. A year and a half later, on September 14, 2023, Arm went public at a $60 billion valuation on the Nasdaq. The termination was a notable setback for Nvidia, a company that has used past acquisitions to fuel its rapid growth, but it still holds a $147.3 million dollar stake in the company.

Equity Holdings

Along with these acquisitions, Nvidia holds major stakes in a handful of public companies, listed below:

• Arm: Chip designer Arm was originally founded to design a chip for Apple. It was launched as part of a joint venture in 1990 between Apple, VLSI Technology, and Acorn Computers. Today, its designs are found in the vast majority of mobile devices globally.
• Nano-X Imaging: Headquartered in Israel, Nano-X Imaging develops AI technology used in medical imaging.
• Recursion Pharmaceuticals: Biotech firm Recursion Pharmaceuticals uses AI technologies to discover new drugs and treatments for rare diseases.
• SoundHound AI: The Santa Clara-based company SoundHound AI uses AI technology for voice and sound recognition.
  

What Brands Does Nvidia Own?

Chipmaker Nvidia has undergone major acquisitions over the last several decades, including purchases of Mellanox Technologies, 3dfx Interactive, MediaQ, and Hybrid Graphics.

Which Companies Has Nvidia Invested In?

As of December 31, 2023 Nvidia reported stakes in publicly-listed companies including Arm, Nano-X Imaging, Recursion Pharmaceuticals, and SoundHound AI.

Who Is Nvidia's Largest Customer?

Tech giants including Google, Microsoft, Amazon, and Meta are Nvidia's biggest customers, driving roughly 40% of its revenue.

The Bottom Line

Nvidia has made several large acquisitions over the last several decades that have played a strategic role in propelling its market position across numerous industries, from data centers to mobile technologies.

As one of the most valuable firms in the world, Nvidia's acquisitions have broadened its capabilities for model training, data center solutions, graphics, high-performance computing, and a host of other technological advancements.

Read the original article on Investopedia.