Nvidia's bid of $125 per share, which is equivalent to about $6.9bn, is a full billion dollars more than Mellanox was valued at, at close of trading on Friday.
The deal follows a competitive bidding process which according to sources familiar with the matter, included rival chipmakers such as Intel and Xilinx Inc.
Mellanox is based in both the U.S. and Israel where it makes high-speed network connecting servers, with a market cap at the end of trading on Friday of around $5.9 billion.
The acquisition is a win for the New York-based activist investor Starboard Value LP, which owns a 5.8 percent stake and had reached a deal with Mellanox a year ago over the composition of its board.
"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", said Huang.
Nvidia gets about a quarter of its revenue from data centres, with the $2.9 billion in sales in 2018 from the segment growing 52 percent year over year.
Nvidia's advantage is that it would have a greater chance of obtaining USA and Chinese regulatory approval as Intel and Mellanox control the market for InfiniBand technology, a networking communications standard commonly used in supercomputers, Calcalist said. This time the action takes place in the supercomputer / high performance computing (HPC) segment. Its network tech is thus installed in "over half of the world's fastest supercomputers and in many leading hyperscale datacenters", boasts new owner Nvidia. Nvidia and Mellanox aren't strangers; they have previously worked together on several products including the likes of the Nvidia DGX-2, as well as the #1 and #2 USA supercomputers - Summit and Sierra.
Nvidia announced at the Consumer Electronics Show in Las Vegas in January an autopilot system for self-driving vehicles called Nvidia Drive.