Intel has said it is acquiring deep learning startup Nervana Systems as the world's largest chip maker turns its focus on expanding its artificial intelligence portfolio. The startup, founded in 2014, has a fully optimised software and hardware stack for deep learning. The company said it will continue to operate out of its San Diego headquarters.

"With this deal, we can now shatter the old paradigm and move into a new regime of computing....... Nervana's AI expertise combined with Intel's capabilities and huge market reach will allow us to realise our vision and create something truly special," said Nervana chief executive officer and co-founder Naveen Rao.

Intel said it will apply Nervana's software expertise to optimise its Math Kernel Library. Besides, Nervana's Engine and silicon expertise will help Intel advance its "AI portfolio and enhance the deep learning performance and TCO of its Intel Xeon and Intel Xeon Phi processors."

While the term of the deal is yet to be disclosed, a source with knowledge of the matter told Recode the purchase price is around $408m (£312).

Intel vice president Jason Waxman said the shift to AI could affect its move to cloud computing. He said machine learning is needed as the company moves from a world in which people control a couple of devices that connect to the internet to one in which billions of devices are connecting and talking to one another.

Nervana has raised $25m in venture funding and also has a contract to work with In-Q-tel. "Raising money was not the problem. That was going to be relatively easy. But by selling to Intel we have access to technology we'd never dream about," Rao said.

Intel said its processor powers more than 97% of the servers deployed to support machine learning workloads. Its Xeon processor belonging to the E5 family is the most widely deployed processor for the deep learning interface. The new Xeon Phi processor delivers performance that is required for deep learning training.

"We believe that bringing together the Intel engineers who create the Intel Xeon and Intel Xeon Phi processors with the talented Nervana Systems' team, we will be able to advance the industry faster than would have otherwise been possible," said Diane Bryant, Intel's executive vice president and general manager of the Data Center Group. "We will continue to invest in leading edge technologies that complement and enhance Intel's AI portfolio," she added.