Nvidia Being Investigated By Regulators for $40B Arm Deal

Shares of Nvidia Corp. fell almost 6% yesterday after the Competition and Markets Authority (CMA) announced that it would be investigating Nvidia’s $40 billion deal to buy UK-based chip designer Arm Holdings.

Nvidia (NVDA) agreed to buy Arm Holdings in September 2020 from Softbank Group, in a deal that combines NVIDIA’s leading artificial intelligence (AI) computing platform with Arm’s vast ecosystem to create a premier AI computing company.

The CMA will consider whether, following the takeover, Arm has an incentive to withdraw from the deal, raise prices or reduce the quality of its IP licensing services to NVIDIA’s rivals as it assesses the possible effects that the deal may have on competition in the UK.

Andrea Coscelli, chief executive of the CMA, said, “The chip technology industry is worth billions and critical to many of the products that we use most in our everyday lives…We will carefully consider the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive or lower quality products.” (See NVDA stock analysis on TipRanks)

Citi analyst Atif Malik reiterated his Buy rating on Nvidia today and set his price target at $600. This implies upside potential of around 19% from current levels.

Malik sees sustained data center and PC gaming demand recovery in the first half of 2021 and expects NVDA shares to beat expectations despite recent relative underperformance.

Consensus among analysts is a Moderate Buy based on 14 Buys, 3 Holds and 1 Sell. The average price target of $596.65 suggests upside potential of around 15% over the next 12 months.

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