Combining Nvidia’s terrific gaming and data center platform with Arm’s massive smartphone and processor ecosystem and you have got the undisputed king of the semiconductor industry.
We don’t actually know if Nvidia can complete the deal. There are a ton of potential obstacles and they’ll have to get regulatory approvals all over the globe.
Nvidia recently acquired Melanox for more data center exposure and that transaction that was held up for ages by Chinese regulators. Lots of people wrote the Melanox deal off but Nvidia’s CEO Jensen Huang got the deal done.
Arm Holdings is an incredible asset. Arm technology is integral to the mobile and internet of things revolutions. Arm designs technology and then licenses it out to all sorts of other semiconductor companies. Years ago, Arm came up with a better architecture for processors. They designed a chip that’s much more energy-efficient than the processors you’ll find in most computers which allowed their technology to take the mobile market by storm. Today, their tech is in everything from autonomous cars, to the internet of things, and even smart home devices and all sorts of automation. It’s in smartphones and tablets and some computers. They license their chip architecture and then their clients can add stuff on top of that for specific applications.
It’s a fabulous business which is why Nvidia is willing to pay $12 billion in cash on top of $21.5 billion in stock which is roughly what Softbank paid four years ago and Softbank poured a ton of money into Arm after the acquisition making it a much better company than before it went private.
On top of that Nvidia’s issuing $1.5 billion dollars of stock to Arm employees. When you add it all up, we’re talking about a $40 billion deal.
Arm’s co-founder Hermann Hauser claims the chip designer’s licensees are “not happy” about its $40B sale to Nvidia, Business Insider’s Martin Coulter reports. His concerns echo worries by analysts that Arm’s sale to a large chipmaker would compromise its successful licensing model. Source: https://www.businessinsider.com/arm-licensees-nvidia-hermann-hauser-softbank-deal-chips-2020-9?r=US&IR=TIR=T
On September 22, 2020, Li Auto (LI) announced a three-way strategic cooperation with Nvidia (NVDA) and Nvidia’s Chinese partner, Huizhou Desay SV. Through this strategic cooperation, Li Auto will be the first OEM equipping its vehicles, the full-size extended-range premium smart SUV to be launched in 2022, with the Nvidia Orin SoC chipset. The Nvidia Orin SoC was released in 2019 and is scheduled to be in production in 2022. Orin uses a 7-nanometer production process to achieve a computing power of 200 TOPS, seven times that of the previous generation, the Xavier SoC. Even with the improvement in computing performance, Orin’s baseline power consumption is 45 watts. In addition, Li Auto will provide end-users with upgradeable solutions, ranging from L2+ autonomous driving with a single Orin chip and 200 TOPS in computing power, to L4 with dual Orin chips and 400 TOPS in computing power. In the future, the use of discrete GPU can further increase the computing power up to 2000 TOPS theoretically, which provides sufficient hardware capabilities for L5 autonomous driving. Desay SV will build on the Orin SoC, and provide an autonomous driving domain controller. On this foundation, Li Auto will develop all autonomous driving program design and algorithms, aiming to become the first new energy vehicle company to independently develop L4 autonomous driving systems in China. Li Auto plans to achieve the full range of autonomous driving in its next generation of vehicles.
On September 21, 2020, RBC Capital analyst Mitch Steves keeps his Outperform rating and $610 price target on Nvidia. The analyst cites “numerous articles”, suggesting that demand for 3080 cards is increasing with a portion of that trend related to cryptocurrency mining. Steves adds that following the ramp-up of decentralized finance applications, profitability for Ethereum mining has increased.
On September 19, 2020, Nvidia (NVDA) became the largest U.S. chipmaker by market value in July, passing industry titan Intel (INTC), but by most measures, Nvidia remains a niche player, Max Cherney writes in this week’s edition of Barron’s. For Nvidia to grow into its value, the company has to do something big, and CEO Jensen Huang may have found the answer with his $40B deal for Arm Holdings, the author notes. If there ever was a way to challenge Intel’s dominance, Huang may have cracked the code, with a combination of Nvidia’s leading graphics processors, Arm’s central-processing-unit chips, and its longstanding partnership with TSMC (TSM), which fabricates many of the world’s most advanced chips, the report adds. Source: https://www.barrons.com/articles/nvidias-deal-for-arm-holdings-is-risky-and-very-smart-51600473858?mod=past_editions
Although there may be regulatory hurdles ahead, CNBC’s Jim Cramer said Thursday he believes investors should look to buy Nvidia after its acquisition of Arm.