Arm purchase increases Nvidia’s lead in the semiconductor industry

September 17, 2020 14:30

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:

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%.

Discover the world's #1 multi-asset platform

Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!

Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
  7. Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  8. The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
  9. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.
Admirals An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.