Intel announced it is buying chip designer Altera for $16.7 billion (£10.94bn), as it tries to grow in the cloud data centre and IoT markets.
The deal, announced on Monday, will be an all-cash transaction, with the price of $54 per share (£35).
Intel CEO Brian Krzanich said: "Intel's growth strategy is to expand our core assets into profitable, complementary market segments
"With this acquisition, we will harness the power of Moore’s Law to make the next generation of solutions not just better, but able to do more.
"Whether to enable new growth in the network, large cloud data centres or IoT segments, our customers expect better performance at lower costs.
"This is the promise of Moore's Law and it's the innovation enabled by Intel and Altera joining forces. We look forward to working with the talented team at Altera to deliver this value to our customers and stockholders."
John Danne, CEO of Altera, added: "Given our close partnership, we've seen first-hand the many benefits of our relationship with Intel, the world's largest semiconductor company and a proven technology leader, and look forward to the many opportunities we will have together.
"We believe that as part of Intel we will be able to develop innovative FPGAs and system-on-chips for our customers in all market segments.
The deal, unanimously approved by both Intel and Altera boards, is expected to be closed in the next six to nine months.
Intel is a manufacturer of computer processors, while Altera concentrates on field programmable gate arrays.