"By combining the teams that created the world's most pervasive GPU and physics engine brands, we can now bring GeForce-accelerated PhysX to hundreds of millions of gamers around the world," said Huang.

Founded in 2002, AGEIA made a name for itself by inventing the Physics Processing Unit (PPU) chip, the world's first dedicated hardware physics processor for personal computers. The company also develops physics software, boasting a list of over 140 games across multiple platforms that utilize PhysX technology.

"Nvidia is the perfect fit for us," added AGEIA CEO Manju Hegde. "They have the world's best parallel computing technology and are the thought leaders in GPUs and gaming. We are united by a common culture based on a passion for innovating and driving the consumer experience."

Processor manufacturer AMD was rumored to be eyeing AGEIA for purchase in November, but had since denied the claims. Competitor Intel picked up physics software developer Havok last September.

The deal is all but final, with only customary closing conditions in the way. More details of the acquisition will be available following Nvidia's quarterly conference call on Feb 13.