Mobileye NV (NYSE:MBLY) and Intel Corporation (NASDAQ:INTC) announced this morning that the latter is acquiring the former for $63.54 per share, representing a premium of 34% from the autonomous driving company’s closing price on Friday. The deal is worth about $15.3 billion in all. Mobileye stock skyrocketed in premarket trades, becoming the most active stock in early trading as the number of shares that changed hands soared past 2 million. Meanwhile, Intel stock slumped.

Intel Deal Mobileye
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Needless to say, analysts were quick to respond with their thoughts on the acquisition, and most say it makes sense.

Deal is no surprise but timing is

RBC Capital Markets analyst Joseph Spak said this morning that he doesn’t find the deal or the fact that Intel is the buyer surprising. What he does find surprising is the timing of it; the acquisition is expected to close within the next nine months.

He notes that the acquisition demonstrates how important automotive tech has become in the technology sector. Further, it showcases how valuable the company’s products and customer relationships are. Intel and Mobileye have already been working together anyway, with the former investing in the HERE project, and the latter partnering with that project through its REM product. The two companies have also been working with BMW on autonomous cars.

Spak also points out that he said some time ago that Mobileye was an attractive target, although he wasn’t actually calling for a buyout. He’s surprised by the timing and also that the autonomous driving company even decided to sell itself. He finds it very important that Intel is going to let the Israel-based firm keep operating as a separate unit within the much larger chip maker.

Autonomous driving is the future of the tech industry

The deal continues a trend of other autonomous driving acquisitions in recent years. While Google parent Alphabet has been working on self-driving cars for years (although it was said to have trimmed down the size of the project over the last year), others have also been racing for the finish line. Tesla is trying to forge ahead with its beleaguered Autopilot software, which critics have blasted because it is in beta. They accuse the EV maker of using average drivers as guinea pigs, which it denies.

Even Uber is getting in on the self-driving car craze, envisioning a future of a self-driving car fleet rather than one involving human drivers sharing their vehicles with paying riders. Uber also shelled out $680 million in August 2016 to speed up its efforts, and Alphabet filed suit against it, alleging theft of trade secrets in connection with the deal. General Motors also paid $1 billion to buy Cruise Automation last year, notes MarketWatch, and just last week, Samsung closed its $8 billion acquisition of Harman International Industries.

Are more autonomous driving deals ahead?

Morgan Stanley analyst Adam Jonas downgraded the autonomous driving company last month, highlighting “several points where we could be wrong, focusing on the potential for tech firms to appreciate the strategic value and time value embedded within MBLY’s products.” What he means by “time value” is speeding up an acquirer’s progress by purchasing a firm that’s already further ahead of it. He also assigned a $44 per share price target to the company’s stock, which is quite a bit lower than the acquisition price.

In his March 13 note, he presented his analysis of 39 global auto suppliers, including Mobileye. He ranked it close to the top of all the companies on various strategic metrics. He placed the company tied with Huayu Auto,NIfCO and Autoliv. Delphi was at the top of his list, followed by Denso, Continental and Koito. The rankings were based on intellectual property, OEM relationships, scale, cost advantage, sustainability and management awareness.

Will Delphi be next?

In the wake of the Mobileye – Intel and Samsung – Harmon deals, he believes other companies and investors will be examining their own long-term strategic places and “the value of their role in the ecosystem of the future automotive model.” He now questions which autonomous driving company will be the next acquisition target. Indeed, Mobileye is one of the hottest technology names right now, so it comes as a surprise that it would sell itself.

Deutsche Bank analyst Rod Lache seemed to echo Jonas’ sentiment, although he specifically highlighted Delphi. He feels that the Mobileye – Intel deal “indirectly validates the positioning of Delphi in this burgeoning market.” Last year, Delphi was Mobileye’s Tier One partner in 25% of its wins, and it’s the company’s partner in the development of “turnkey Autonomous Driving Solutions,” he pointed out in his research note this morning.

In his conversations with his contacts in the industry over the last few months, he’s found that automakers are going after one of two key areas in autonomous driving. One is the development of artificial intelligence on their own, either with or within Mobileye’s involvement through its REM technology. The second is collaboration with Mobileye and Delphi on their system.

Shares of Mobileye stock skyrocketed by more than 30%, reaching as high as $61.51, while Intel stock declined by as much as 2% to $34.94 per share during regular trading hours on Monday.