Why Nvidia Stock Stumbled on Tuesday
What happened
Shares of semiconductor stock Nvidia (NASDAQ: NVDA) slipped in morning trading on Tuesday, possibly because investors are worrying that after Nvidia failed to acquire Arm Holdings earlier this year, one or more of its rivals might succeed in gaining control of Arm.
As of 10:10 a.m. ET today, Nvidia stock was down 2.2%.
Image source: Getty Images.
So what
As London's Financial Times reports this morning, Nvidia rival and Arm Holdings customer Qualcomm (NASDAQ: QCOM) is looking to buy a stake in Arm when owner SoftBank Group (OTC: SFTBF) conducts an initial public offering (IPO) for that semiconductor subsidiary later this year. Qualcomm CEO Cristiano Amon even suggested that Qualcomm might try to acquire Arm Holdings in its entirety by forming a consortium with other chip companies to raise the tens of billions of dollars that such a move might require.
As the Financial Times points out, E.U. regulators that worried about Nvidia gaining exclusive control over Arm and its technology might be more amenable to approving a buyout where control of Arm would be dispersed among several members of a consortium.
Neither of these scenarios sound like particularly bad news for Nvidia, though. On the one hand, if Qualcomm buys a piece of Arm, this will not prevent Nvidia from continuing to benefit from licensing access to Arm technology itself. The same is true under the consortium scenario -- assuming, at least, that Nvidia joins the consortium.
Now what
Neither of these scenarios would be quite as good (from Nvidia's perspective) as getting to buy Arm all for itself. But that scenario is now off the table in any case.
Meanwhile, in other Nvidia news, the Los Alamos National Laboratory's new Venado supercomputer will use Nvidia chips exclusively, including its Grace Superchip CPUs and Grace Hopper Superchips. Furthermore, Nvidia chips will be used in the Swiss National Supercomputing Centre's Alps supercomputer as well, according to TomsHardware.com.
No word on what this means for Nvidia's sales in terms of dollars and cents. But it does appear to support the thesis that the data center division is driving growth at the company, and that demand for its most powerful chips remains strong.
This bodes well for Nvidia stock recovering from its 37% slump so far this year, and getting back on the growth path.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Qualcomm, and SoftBank Group Corp. The Motley Fool recommends Softbank Group. The Motley Fool has a disclosure policy.
