Why is everyone talking about Nvidia Stock?

Nvidia (NASDAQ: NVDA) is one of the most talked about chipmakers in the world. It is the market leader in gaming GPUs, its leading GPUs handle AI tasks for data centers and driverless cars, and its Arm-based processors power gaming consoles, set-top boxes and devices. servers.

However, Nvidia has appeared to dominate the headlines more frequently than many other chipmakers over the past year. Let’s take a look at the top five reasons everyone is talking about Nvidia.

1. His plan to buy Arm Holdings

Nvidia has agreed to buy Arm Holdings, one of the world’s largest chip designers, for $ 40 billion from SoftBank Last September. Arm does not manufacture any chips, but licenses their designs to chipmakers like Qualcomm and Apple. Arm-based chips now power over 95% of smartphones worldwide.

If Nvidia buys Arm, it will support the development of its current Arm-based processors (including data center-oriented Tegra and Grace) and new processors. But this acquisition won’t be closed anytime soon, due to antitrust investigations, opposition from rival chipmakers and a lengthy legal battle against Arm China CEO Allen Wu, who refuses to resign even after. to have been ousted.

New developments in this messy takeover attempt could keep Nvidia in the headlines – and raise questions about its long-term goals.

2. The global shortage of chips

Nvidia is a factory-less chip maker that outsources the production of its chips to Samsung and Semiconductor manufacturing in Taiwan (NYSE: TSM). Therefore, the global chip shortage – which started before the pandemic but has been exacerbated by the crisis – will impact its ability to meet market demand for new chips.

On last quarter’s conference call, Nvidia CFO Colette Kress warned that she “will remain in limited supply in the second half of the year.” Analysts still expect Nvidia’s revenue to jump 49% this year, thanks to strong demand for its gaming and data center GPUs, but its growth rates would likely be even higher if it did not. was not facing a global shortage of chips.

3. Another Looming Cryptocurrency Crisis

When cryptocurrency prices rose in 2017, many miners piled up Nvidia’s gaming GPUs, resulting in a market crunch and high prices for PC gamers. But when cryptocurrency prices plunged in 2018, these miners sold their used GPU cards at lower prices, flooding the market with excess inventory and dampening demand for Nvidia’s new GPUs.

Earlier this year, Nvidia took proactive steps to avoid another bubble by halving hash rate, or mining efficiency, to Ethereum (CRYPTO: ETH) in its new RTX gaming GPUs. He also announced that he would launch CMP (Cryptocurrency Mining Processor) products dedicated to miners.

Unfortunately, miners quickly bypassed Nvidia’s anti-mine measures, hoarded the chips again, and then tossed them amid China’s cryptocurrency crackdown and an upcoming Ethereum adjustment – this which will make it impossible for traditional GPUs to mine cryptocurrency for a profit. These events could all cause familiar headaches for Nvidia later this year.

4. Rumors about Intel and GlobalFoundries

Nvidia stock recently plunged after The Wall Street Journal claims Intelligence (NASDAQ: INTC) was interested in buying Advanced micro-systemsthe former foundry partner of GlobalFoundries, for $ 30 billion. Intel is already planning to double its proprietary foundries to catch up with TSMC and Samsung, so the purchase of GlobalFoundries could complement those plans.

This expansion could also support production of Intel’s new line of discrete GPUs, launched in late 2020. These GPUs have yet to gain significant market share against Nvidia and AMD, but they could eventually gain a foothold with strategies aggressive pricing and bundling. .

But that’s only speculation at the moment, and Intel still faces a long, bitter battle in the gaming GPU market – so the sale was just a knee-jerk reaction to some market noise.

5. Division of shares of Nvidia

Finally, Nvidia’s planned 4-for-1 stock split on July 20 caught the attention of investors who previously thought its shares looked too expensive. But stock splits don’t really change a stock’s actual valuation, which is traditionally measured by its price-to-earnings or price-to-sell ratios since investors always own the same percentage of the company. So if you think Nvidia is too expensive at 40 times the earnings eventually, then a stock split shouldn’t change your mind.

In theory, the Nvidia stock split could attract some small retail investors who don’t want to pay $ 700 for a single stock. But most trading platforms, including Robinhood, already offer free fractional trades – so investors shouldn’t expect Nvidia’s stock division to attract a bull rush.

The main points to remember

On these five points, investors should pay more attention to the Arm deal, the current chip shortage and the potential crypto bubble instead of Intel’s smelter plans or the 4-for-1 stock split. The first three points could impact Nvidia’s growth, while the last two points are mainly market noise.