After several days of speculation, today NVIDIA confirmed that it would acquire chipmaker Mellanox for $6.9 billion, paying $125 per share in cash, in an ongoing consolidation of chipmakers — and in this case those making chips for supercomputers, a crucial market segment in this age of cloud services.

The deal is expected to close at the end of 2019.

The news caps off what the media had reported as a bidding war between NVIDIA, Intel and Microsoft for the company now based out of San Jose but originally founded in Israel. Interestingly, this final price is lower than what had been reported as the final offering price. First, there were reports that Microsoft was interested in the company. Then Intel came into the picture, looking to buy it for around $6 billion, reports had claimed; finally NVIDIA emerged on the last day with a $7 billion+ all-cash offer, according to reports.

All are higher than Mellanox’s closing price on Friday, which was around $5.9 billion.

The deal underscores ongoing consolidation in the world of processors, and is a key move for NVIDIA to shore up its market share, specifically in high-performance computing and powering supercomputers. The combined companies will power more than half of the world’s 500 biggest computers, covering “every major cloud service provider and computer maker.”

It also snaps Mellanox out of the hands of other vendors focusing energy on the same market. Intel, for one, has been gearing up its focus on high-performance computing with its range of Cascade Lake chips, while IBM earlier this year unveiled its own efforts by showing off the world’s first commercial quantum computer.

While NVIDIA has focused its energies on computing, Mellanox works across Ethernet and other networking technologies — complementary areas for the two when addressing new computing and data transfer challenges brought about with the rise of AI, cloud services, an explosion of smartphone and other connected device usage and as-yet nonexistent tech like self-driving cars, which will put even more strain on our data infrastructure.

“The emergence of AI and data science, as well as billions of simultaneous computer users, is fuelling skyrocketing demand on the world’s datacenters,” said Jensen Huang, founder and CEO of NVIDIA, in a statement. “Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine. We’re excited to unite NVIDIA’s accelerated computing platform with Mellanox’s world-renowned accelerated networking platform under one roof to create next-generation datacenter-scale computing solutions. I am particularly thrilled to work closely with the visionary leaders of Mellanox and their amazing people to invent the computers of tomorrow.”

NVIDIA said it’s interested specifically in Mellanox to “optimize datacenter-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilization and lower operating cost for customers.” It helps that the two have already collaborated together, specifically working on building the world’s two fastest supercomputers, Sierra and Summit, for the U.S. Department of Energy. NVIDIA notes that a number of cloud service providers also work with both vendors.

Once the combination is complete, NVIDIA intends to continue investing in local excellence and talent in Israel, one of the world’s most important technology centers. Customer sales and support will not change as a result of this transaction.

“We share the same vision for accelerated computing as NVIDIA,” said Eyal Waldman, founder and CEO of Mellanox, in a statement. “Combining our two companies comes as a natural extension of our longstanding partnership and is a great fit given our common performance-driven cultures. This combination will foster the creation of powerful technology and fantastic opportunities for our people.”

More to come.