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Nvidia takes ‘big step forward’ as rivals endorse Arm deal

One analyst raised the chances of Nvidia’s proposed US$40 billion takeover of Arm to 30% after three of the world's biggest chipmakers publicly expressed their support for the divisive deal.

  • Nvidia Corp (NASDAQ: NVDA) share price rose as much as 5.4% on Monday (29 June 2021)
  • The rally came after three of Arm’s customers, including Nvidia’s main US rival Broadcom Corp., publicly expressed their support of Nvidia’s proposed US$40 billion takeover of Arm
  • Citi analyst Atif Malik then raised the probability of the acquisition deal going through from 10% to 30%
  • Nevertheless, the deal’s deadline has been pushed back to September 2022 in light of lengthy regulatory review processes across various jurisdictions
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Nvidia stock price: What’s the latest?

Nvidia shares closed 5% higher on Monday, after three of the world’s largest chipmakers endorsed the company’s proposed US$40 billion acquisition of Arm Ltd.

This included US rivals Broadcom Corp. and Marvell Technology, Inc., as well as Taiwan-based MediaTek Inc. The three companies are among the first customers of UK-based semiconductor group Arm’s to have publicly given their support of the takeover.

This latest update saw Citi analyst Atif Malik raising the probability of the acquisition deal being successful to 30% from 10% previously. He has given a ‘buy’ call and US$720 price target on the semiconductor’s stocks.

The analyst said that the news is a ‘big step forward’ and that UK authorities will probably end up approving the deal because of Nvidia’s commitment to investing more into Arm.

However, Malik believes that China is less likely to approve the deal and that the ‘path remains narrow’, as it could potentially hurt their access to Arm.

Deal deadline extended to September 2022

Chinese antitrust lawyers said earlier this month that the review process in China could take up to 18 months before any conclusion is reached.

Meanwhile, European regulators are reportedly reluctant to review the case until after the summer holidays. The UK government is reportedly planning to conduct a national security review of the proposed acquisition.

When the Arm deal was first announced last year, it was immediately met with widespread criticism by many of Nvidia’s rivals, who were concerned that a take over of Arm would cause its position as a neutral intellectual property licence supplier to be compromised.

The deal was originally expected to be completed by March 2022, but the deadline has been extended to September 2022, in light of lengthy regulatory review processes ahead in the US, Europe and China.

What are analysts’ latest ratings on Nvidia?

The latest analyst sentiments published by MarketBeat show that Nvidia has a consensus rating of ‘buy’ and an average price target of US$680, which represents a 15% downside potential from its last traded price.

The latest rating came from Wells Fargo analyst Aaron Rakers, who raised his firm’s price target to US$875 from US$715, while keeping an ‘overweight’ rating on 23 June 2021.

In other news, Nvidia is expected to start trading on a stock-split basis from 20 July 2021 as previously reported.

According to CNBC anchor and The Street founder Jim Cramer, the stock split ‘does nothing’ in making Nvidia more appealing, and that investors should only buy into a stock based on a company’s fundamentals.

‘The fact that the stock went up on the split news just shows that there’s too many individual investors involved, and who will eventually realise “wow I just paid up for something that didn’t really move the stock and I thought it was going to because there was a lot of juice involved,”’ he said during a video interview with The Street.

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