Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of both Intel (NASDAQ:INTC) and Altera (NASDAQ:ALTR) surged on Friday after The Wall Street Journal reported that Intel is in talks to acquire Altera in what would be the largest acquisition in Intel's history. Intel closed up 6.38% on Friday, while Altera rocketed 28.39% higher.
So what: Altera designs FPGAs, or field-programmable gate arrays, which can be reprogrammed after manufacturing in order to perform specific tasks efficiently. An FPGA paired with a CPU can provide acceleration for computationally intensive tasks, allowing the combination to provide a massive performance increase compared to a CPU alone.
Intel and Altera have already teamed up on multiple occasions. In 2013, the two companies struck a deal for Intel to manufacture Altera's chips, potentially giving Altera an edge over competitors thanks to Intel's bleeding-edge foundry capabilities. In addition to this deal, Intel and Altera collaborated on an Intel Xeon CPU with an integrated FPGA last year.
Graphics processing units are an alternative to FPGAs, allowing for the same sort of acceleration, and this deal could be a blow to NVIDIA's enterprise business if it goes through. Intel already sells its own line of accelerator cards meant to compete with GPUs, the Xeon Phi, but they haven't gained much traction.
Now what: The terms of the potential deal haven't been disclosed, and it's not yet clear how close Intel and Altera might be to reaching an agreement. Altera had a market capitalization of $10.4 billion before today's spike, and any deal would likely involve a premium to that price.
Timothy Green owns shares of Nvidia. The Motley Fool recommends Intel and Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.