By Dana Mattioli and Dana Cimilluca 

Intel Corp. is in talks to buy Altera Corp. in a deal that would be the chip-making giant's largest takeover ever.

Terms of the potential deal and its timing couldn't be learned, and it is possible there ultimately won't be one.

With a market capitalization of $10.4 billion Friday afternoon, Altera would be a big bite for Intel, which has traditionally stuck to smaller acquisitions whenever it has done deals.

Intel is a giant in the chip industry, with a market capitalization of about $140 billion, but weakening demand for personal computers has hurt its earnings. This month, the Santa Clara, Calif., company cut its revenue outlook for the first quarter by nearly $1 billion to roughly $12.8 billion.

Altera, based in San Jose, Calif., designs processors used in phone networks, cars and other products.

Intel, which supplies most of the chips that serve as calculating engines in PCs and server systems, began suffering several years ago as consumer spending shifted from laptop computers to tablets and smartphones. Rival chip designs have been used in many of those products.

Intel and Altera have a history of cooperation. In 2013, Altera announced that it would begin using Intel technology in its chip designs. As part of a 12-year agreement between the companies, Intel agreed that Altera would be the only major programmable-chip maker for which it would help build products.

Acquisition activity among such companies has picked of late. Just this month, NXP Semiconductors NV agreed to buy Freescale Semiconductor Ltd. for $11.8 billion.

Intel's last big acquisition was in 2011 when it closed on a $7.7 billion deal to buy security-software company McAfee Inc.

Intel stock, which had risen 18% in the past year, rose 4.3% to $31.37 following news of the acquisition. Altera stock, down 2.5% in the past 12 months, jumped 22% to $42.05.

Write to Dana Mattioli at dana.mattioli@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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