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Arm purchase increases Nvidia’s lead in the semiconductor industry

September 17, 2020 13:30

Arm purchase increases Nvidia’s lead in the semiconductor industry

After reporting strong earnings and pushing to new All-Time Highs, Nvidia saw a sharp correction into the start of September, following its tech giant peers of Facebook, Amazon, Netflix, Google, Microsoft and Apple.

The Nasdaq100 dropped 10% in three days, seeing its quickest 10% correction ever while the "FANGMAN" complex lost more than 1 trillion USD in market cap over the last week of trading with Nvidia dropping more than 10%.

Nvidia purchases Arm for 40 billion USD – high price for a big deal

With stepping back and looking at the bigger picture, the outlook for Nvidia looks positive and every deeper correction increases the attractiveness of the tech giant's stocks, risk-reward wise.

When Nvidia reported its latest earnings, data numbers clearly outperformed and brought in $1.75 billion in revenue for the company. The company's gaming segment brought in $1.65 billion in revenue over the same period.

This explains why the recent Arm's purchase of Nvidia for $40 billion makes a lot of sense, even though some traders and analysts will be swallowing when looking at the price and realizing that, once completed, it will be the largest semiconductor deal of all time, in USD.

Here are some key points to consider in Nvidia's purchase of Arm:

  • Arm-designed chips can be found in nearly every smartphone sold today, as well as in countless other devices
  • That said, the purchase of Arm will create a chance for further growth of Nvidia's business in selling chipsets and software to data centres
  • It will also allow for growth in the integration of Arm's CPU technology in combination with Nvidia's focus on graphics processors (GPU)

This purchase could level the path to a massive lead on the rest of the semiconductor industry.

How to trade #NVDA in this environment?

In general, we will very positive and bullish on Nvidia stock, technically, as long as we are trading above the SMA(200).

Risk-reward wise, we'd appreciate a deeper correction with the stock already finding itself up more than 100% year-to-date.

That said, an A-B-C move down to 420/30 USD per share seems possible.

A sustainable drop to below that region would initially neutralize the picture, while we still consider a re-test of the region around 400.00 USD an interesting region for pro-cyclical long engagements from a risk-reward perspective, too:

NVDA chart

Source: Admiral Markets MT5 with MT5SE Add-on #NVDA chart (between 23 April 2019 to 16 September 2020). Accessed: 16 September 2020 at 2:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, #NVDA increased by 64.39%, in 2016, it increased by 223.85%, in 2017, it increased by 81.28%, in 2018, it fell by -31.01%, and in 2019, it increased by 76.25%, meaning that in five years, it was up by 1,068.9%.


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