Nvidia Stock: the good news in its arm acquisition failure

0

Text size

Nvidia publishes its results on February 16.

David Paul Morris/Bloomberg


Nvidia

earnings could be the catalyst boosting the stock, which has been hovering since the graphics chip maker announced it was abandoning its acquisition of chip designer Arm.

When Nvidia (symbol:


NVDA

) reports earnings on Feb. 16, investors will focus on growth in its data center segment, updates on its network supply constraints and gaming demand in 2022, the Citigroup analyst said. Atif Malik in a research note.

“We expect upside results, with data center beats and online gaming based on supply chain feedback,” he wrote.

Nvidia’s forecast points to 4% sales growth quarter over quarter, or $7.4 billion in sales plus or minus 2%. Data centers could help spur that growth, Malik said, buoyed by a new product launch and expansion of artificial intelligence and machine learning solutions.

As some investors fear there will be a setback in the gaming division due to potential changes in digital currency


Ethereum,

Malik isn’t too worried, maintaining a buy rating on Nvidia shares.

Nvidia had a rocky start to the year, losing almost 17%. Overall, high-growth tech stocks have been hit by rising bond yields and the possibility of a series of interest rate hikes from the Federal Reserve. But Nvidia has had additional headwinds related to its proposed $40 billion acquisition of chip designer Arm from


Soft Bank
.

The Federal Trade Commission filed a lawsuit to block the acquisition in December, citing competition concerns. Earlier this week, the parties agreed to “terminate the agreement due to significant regulatory challenges”.

But regulatory hurdles may have been a blessing in disguise for Nvidia.

“This could be a net positive for NVDA in certain scenarios,” Bank of America analysts wrote in a note when speculation the deal collapsed began circulating.

“NVDA doesn’t need to own Arm to use Arm technology to grow in the data center,” they added.

Nvidia could also have landed in a messy internal spat between Arm and its Chinese arm, Arm China, which went rogue last year, claiming it was “independently operated and controlled by the Chinese.”

In an annual filing published on the UK Companies Register, auditors said they were unable to access Arm China’s financial or management information, given unresolved disputes with a “member of senior management”.

The dispute could jeopardize SoftBank’s plan to take Arm’s business public, with Arm’s chief financial officer telling the Financial Times that “management turbulence” in the China division must first be resolved. If the initial public offering goes ahead, it could be the biggest chip IPO ever.

Arm China did not immediately respond to a request for comment.

Nvidia stock fell 5.5% on Friday to $244.02.

Write to Sabrina Escobar at [email protected]

Share.

About Author

Comments are closed.