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Nvidia Corp. (NVDA) - Get NVIDIA Corporation Report said Monday that will will buy Israel's Mellanox Technologies (MLNX) - Get Mellanox Technologies, Ltd. Report for around $7 billion, outbidding chipmaking rival Intel (INTC) - Get Intel Corporation Report  for the cloud computing semiconductor specialist. 

Nvidia said it will pay $125 per share for Mellanox, a 15% premium to the stock's Friday closing level and a deal that would value the Yokneam, Israel-based firm that specializes in InfiniBand interconnect technology. Nvidia said the purchase would be immediately accretive to earnings, margins and cash flows.

"The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world's datacenters," said Nvidia CEO Jensen Huang. "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."

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Nvidia shares were marked 0.25% higher in the opening minutes of trading Monday and changing hands at $151.00 each. Mellanox shares surged 8.8% to $119.01 each, a move that would take their six-month gain past 55%. Intel shares traded 0.76% higher at $52.90 each.

Reports had suggested that both Intel and Xilinx Inc. (XLNX) - Get Xilinx Inc. Report were interested in purchasing Mellanox, which generated $1 billion in revenues last year, after activist investors Starboard Value LP pushed the company for changes after building a 5.8% stake in the group, which also has offices in Sunnyvale, California.