Deal to acquire Altera would shore up Intel’s server business.
Intel is in talks to acquire chip-maker Altera, in a deal expected to exceed $10bn.
Both companies have declined to comment after the deal was first reported in the Wall Street Journal.
Intel, which has only last year extended its chip manufacturing deal with Altera, would benefit from strengthening its presence in data centres.
The competition in the market is getting stronger, as companies such as ARM Holdings prove to be worthy challengers to Intel.
Analysts at Citi, said: "We believe an acquisition of Altera would be accretive to Intel’s margins and eventually could be effective fab filler."
Altera’s chips are used in telecoms and wireless equipment, as well as military hardware, automotive and industrial applications.
The deal will see Intel look to shore up its server business as sales in the PC chip market continue to decline, and a move into the mobile market proves to be making slow progress.
Altera’s largest customers are currently Huawei and Ericsson, while it has also had an ongoing relationship with Intel since 2013.