Nvidia's Future Looks Bright
Nikhil Gunderia & Javier Frausto
Nvidia(NVDA) investors are very bullish on the NVIDIA-ARM deal and positive Ampere reviews set Nvidia up for strong revenues in the future.
On Monday, Bernstein released their main takeaways from their investor survey on the deal that saw Nvidia buying Arm for $40 billion. Nvidia paid a hefty fee for Arm at roughly 20 times forward sales estimates but Chief Executive Officer of Nvidia, Jensen Huang thinks it will help future developments of the data center business.
The investor survey was about 50/50 US vs international, ~60/40 long-only vs hedge fund, showing a good diversity in respondents. Investors believe that this deal closure is a toss-up with ~50/50 chance of it working out. Expectations are all over the radar with investors seeing regulatory blockage as the dominant risk factor in the deal.
Respondents appear positive on the financial and strategic impact of this deal. ~80% of the respondents see this deal as a “somewhat” or “highly” logical move in a strategic sense. In relation, 69% of respondents see this deal as a “somewhat” or “highly” value accretive for Nvidia.
Respondents were very bullish on Nvidia, however, very bearish on Intel. Nvidia was voted the most bullish (followed closely by AMD and TSMC). 56% of respondents identified Intel as the most bearish stock in the semiconductors industry.
Aside from its deal with SoftBank for ARM, Nvidia also made headlines due to the success of their new graphics cards. At Nvidia’s GeForce Special Event earlier this month, they announced the release of three new products including the GeForce RTX 3080. According to a Morgan Stanley report this morning, the GeForce RTX 3080 chips were sold out immediately which could be a symbol of Nvidia’s future success.
Similarly, Nvidia received raving reviews from critics due to the drastic change in performance between the new and previous generation of GPUs while managing to keep the change in price minimal. According to The Verge, “The RTX 3080 ushers in the next generation of 4K gaming, thanks to some raw horsepower and a lot of the promises that Nvidia made with the RTX 2080 finally starting to materialize”.
Despite receiving criticism for the new chips’ high power consumption, the ARM deal and the successful release of its new products are the two main factors contributing to the positive outlook on Nvidia’s future.
Disclosure: At the time of publication, we are long Nvidia. We wrote this article ourselves, and it expresses our own opinions. We are not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.