Shares of Nvidia Corp corrected on Friday, a day after the chip maker’s chances of shutting down its acquisition of chip designer Arm Ltd.
The stock, which fell as much as 6% on Friday, fell 4.5% to close at $306.93, or 8% below its all-time high of $333.76 on November. Shares are still up 129% over the past 12 months, compared to a 24% gain on the S&P 500 index SPX,
Late Thursday, the Federal Trade Commission ordered SoftBank Group Corp. sued to block Arm’s $40 billion acquisition from 9984,
It has faced several headwinds since it was first announced back in late 2020.
In a note, Bernstein analyst Stacy Rasgon, who has an outperform rating on Nvidia and a $360 price target, said of the deal “no one thinks it will close anyway,” arguing the FTC’s action against other regulators. Supports the thinking on agencies, and that Nvidia will be “okay either way.”
The FTC’s release “indicates that the agency has collaborated closely with competing agencies in the European Union, the UK, Japan and South Korea (i.e. almost every important geography except China), suggesting where the FTC is headed, The rest of the world is likely to follow,” Rasagan said.
“A proprietary branch would be great, and enable Nvidia to help build and invest in a broader Arm datacenter ecosystem, and we would love to see that happen,” Rasgon said. “But if they can’t close it, they will save the purchase price in cash and stock (originally ~$40B, now closer to ~$75B given the share price appreciation since the deal was announced), And will undoubtedly continue to push our Arm server and DPU efforts forward.”
Citi Research analyst Atif Malik, who has a buy rating on Nvidia and a $350 price target, said that with the FTC action he knows there is a 5% chance the deal will close, down from the previous 30% chance.
“If Nvidia can offer measures that could include, among other options, creating a ‘Chinese Wall’ between the R&D engine and the Arm business contracts, we see a possible path out,” Malik said.
While Nvidia shares threatened to fall into correction territory, Advanced Micro Devices Inc. amd,
Shares closed in a correction on Friday, down 4.4% at $144.01, or 11% below its high of $161.09 set on Nov. 29.
Both Nvidia and AMD recently posted strong, record earnings amid ongoing global chip shortages.
PHLX Semiconductor Index SOX,
Friday ended 0.2%, or 2.7%, down from its all-time high of 3,912.02 set on November 19.