Nvidia Faces Scrutiny

Nvidia
Nvidia

Nvidia deserves to be mentioned along with the biggest tech names. Year over year $NVDA has nearly tripled in value, from $196 a year ago. Jim Cramer has described their CEO Jensen Huang as a modern day Einstein. Their recent blockbuster acquisition of Arm for a cool $40 billion further cements their position as a leader in AI.

As with most blue chip names, $NVDA’s future potential is priced in, as it battles AMD and Intel for the future of digitization.

AMD and NVDA stock are fundamentally expensive. Nvidia has a lower price-earnings ratio, so in that sense, it is 30% cheaper than AMD. However, Nvidia has twice as much hope built into its stock. Its price-sales ratio is almost 30x, so buyers have priced in 30 years of income today.

Nicholas Shahine for InvestorPlace.com

Nvidia faces another impending headwind – challengers to the Arm acquisition including unwanted attention in a brewing US/China tech cold war.

First, the UK government is being pressured to oppose the sale of Cambridge-based Arm for national security reasons. Second, the Chinese government is expected to scrutinize the deal in an attempt to extract “specific guarantees before granting approval” according to Bill Ray at Gartner.

Our take:

Nvidia’s acquisition of Arm places $NVDA as the largest chip company in the West by market value and global reach. The US, UK and China will all need to weigh in and approve the deal – not a sure thing and not without overcoming significant asks from each government. Arm is considered Britain’s “tech hero” and the Chinese are dependent on it for it’s chips. Yet, this is all to say that Nvidia is attempting to run the table and dominate the market. Near term and with news related to the above challenges, $NVDA may face selling pressure, but long term, you are looking at a venerable beast.

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