- Nvidia agreed to pay $40 billion and acquire a major chipmaker Arm from SoftBank Group
- The Japanese giant SoftBank purchased Arm for $32 billion four years ago
- Any pullback to $430 zone should be seen as an opportunity to get on the long side
Fundamental analysis: More than a chip maker
In a deal that is likely to have a profound impact on the semiconductor industry, Nvidia agreed to pay $40 billion and acquire a major chipmaker Arm. Its previous owner, SoftBank Group, made Arm available for sale as it looks to improve its liquidity following the pandemic.
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Arm, a chipmaker that supplies Apple and others in this industry would fall under the control of a single company, Nvidia, the largest semiconductor company in the U.S by market value. However, the deal is likely to face challenges from its rivals and regulators.
“AI is the most powerful technology force of our time and has launched a new wave of computing,” Jensen Huang, NVIDIA’s CEO, said in a statement.
“In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI.”
The Japanese giant SoftBank purchased Arm for $32 billion four years ago. Reuters reported that SoftBank was discussing taking the company private, a process that is likely to continue after the acquisition is completed.
Nvidia will now work to close the deal, which may not be an easy task.
Some analysts believe that the deal “will rightly face huge opposition” from Arm’s customers.
“An acquisition by Nvidia would be detrimental to Arm and its ecosystem,” Geoff Blaber, the VP of Research at CC Insight said.
“Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode”.
Technical analysis: Record highs targeted
Shares of Nvidia soared nearly 6% on the Arm news. Earlier this month, NVDA price hit an all-time high at $589.07, before pulling back over 20% as the stock market corrected lower.
This dip has been used to buy NVDA as investors attempt to push the price action above the $600 mark. Giving the performance of the company in recent years, NVDA stock is clearly a buy. The integration of the Arm business will only solidify Nvidia as a leader in the chip-making industry.
In case the market corrects further lower, any pullback to $430 zone should be seen as an opportunity to get on the long side.
Nvidia agreed to acquire Arm from SoftBank Group in a $40 billion deal. The deal will likely face opposition from regulators, while the NVDA share price is likely to continue to outperform the broader market.