Quick recovery after stock split dipShares opened down 75% on Tuesday after the top dog chip maker began trading on a four-for-one split adjusted basis. Not to worry though, prices closed down less than 1% at the end of the day.
Nvidia, which has been one of the few firms to come out of the global chip shortage laughing, has seen the pandemic take its shares up from a March 2020 low of $180.68 to a high of $835 at the beginning of July. Prices returned back to around those pre-pandemic levels on Tuesday after initiating a four-for-one stock split. Nvidia announced the stock split late in May as a part of a plan to make its stock more accessible and appealing to investors and employees.
The stock closed at $750.19 on Monday before the split and had a market cap of just under $468 billion. Existing shareholders pocketed a dividend of three more shares, so it’s not really a big deal for them – in fact, there was some excitement leading into the split, and prices lifted 3.41% on Monday. But the new price of $186.12 is much more enticing to those who wanted to hop on the Nvidia train but couldn't afford the price tag, while lower prices can also lead to more pin action because of option contracts, making the company attractive as a longer term investment.
Could China derail Arm deal?Nvidia is hoping to avoid delays with its $40 billion takeover of Arm, but is struggling to get past Chinese regulators.
Nvidia has reportedly submitted an application to Chinese competition regulators seeking approval for its takeover of the UK chip designer, Arm – one of the biggest tech deals in history, valued at $40 billion. The application will kick off a period of scrutiny that could take up to 18 months, which means the deal will close later than the company expected when it announced the merge. And what a nerve-wracking 18 months it’ll be. China is a giant market for Arm, with sales in the country hitting around $500 million in 2019. There’s every possibility that China will join the list of countries and corporations opposing the deal, which could send everything spiralling.
The news halted the upwards climb of Nvidia stock, which has been rising steadily over the past couple of weeks on expectations.
Happy timesThere have been a lot of casualties from the global semiconductor crisis, but one company that has come out laughing is Nvidia – whose latest earnings show revenue jumping 84% thanks to gamers and their demand for graphics chips.
Nvidia reported first quarter earnings that saw a serious year-on-year jump in revenue and beat expectations on both earnings and sales. The company reported earnings per share of $3.66 on revenues of $5.66 billion, compared to expectations of $3.28 in earnings per share on $5.41 in revenue.
The chip maker's earnings covered a period of exponential growth in its business and industry, accompanied by a dramatic shortage of chips around the world - demand for gaming and cloud computing skyrocketed during the pandemic, as did demand for chips in crypto mining. Nvidia’s graphics segment, which consists mostly of its graphics cards, saw an increase of 81% to $3.45 million in revenue, and its gaming products were up over 100% to $2.76 billion in sales.
said Jensen Huang, founder and CEO of Nvidia.
Nvidia takes sides in the Crypto/Gamer battleThe battle for chips (the semiconductor kind, not the tasty snack) between cryptobulls and videogamers is heating up: and this week Nvidia took sides, placing a limiter on more of its graphic cards to prevent crypto mining. Prices initially dropped but rebounded later in the day.
Nvidia has a dedicated gamer customer base, but many of them are struggling to get hold of the company’s newest graphic card because all of its chips are being bought up and used for cryptocurrency mining. Nvidia has made its feelings clear on this, making a moves to ease the current shortage. The company first acted earlier this year, when it began to limit how efficiently one of its graphics cards, the RTX 3060, could process Ethereum transactions; and it announced on Tuesday that it would start limiting almost all of its chips, including the ones that are used by the most serious gamers.
the company said in a statement.
However, crypto miners don’t need panic just yet, because earlier this year Nvidia announced a new product just for them – a cryptocurrency mining processor (CMP), specifically designed for crypto mining on the Ethereum network.
Video gaming cards are more easily adaptable for Ether mining than Bitcoin, and the Ethereum network makes up around 90% of crypto rewards that can be won on repurposed video game chips. Though it’s currently the second largest cryptocurrency, Ether’s value has soared this year and its gains have outpaced the OG Bitcoin. In fact, because Bitcoin’s volume is limited to 21 million, there are far fewer tokens left to be mined, making Ethereum a more profitable long-term road for Nvidia’s chips.
Separating these two avenues also means that Nvidia investors can rest a bit easier, hoping that there won't be a repeat of the company’s dismal fiscal 2019 performance, when a steep decline in cryptomining demand led to an excess in inventory, a decline in shipping rates, and a 24% drop in revenue. The latest move creates a bit more of a separation of power between the two worlds, which could provide some financial stability.
U.K. Govt weighs in on Nvidia/Arm dealThe U.K. government intervenes in Nvidia’s proposed $40 billion takeover of chip designer Arm on national security grounds, and prices dump almost 5%.
The U.K. government has officially begun a formal security investigation into Nvidia’s plans to takeover British chip designer Arm because it believes the deal could have national security implications. In September 2020, Nvidia announced that it would be acquiring Arm for $40 billion to create the world's first premier computing company for the age of AI. Oliver Dowden, the UK’s Culture Secretary, on April 19 said that he had written to the Competition and Markets Authority to instruct them to begin a “phase one” investigation to assess the transaction. It is expected that the regulator will have a report ready by the end of July with advice on issues relating to jurisdiction and competition, and a summary of national security concerns.
Set up in the 1980s, Arm is famously referred to as the “Switzerland” of the chip industry thanks to its neutrality is licensing its designs to manufacturers around the world. However, the potential security issues arise from the fact that semiconductors underpin key defence-related technologies – and there are concerns that Arm could eventually raise prices or hurt licensing services to Nvidia’s competitors. Arm’s supposedly neutral position as a supplier within the chip industry has already raised questions around the acquisition because of Nvidia’s existing competition with Arm rivals such as Qualcomm and Intel.
But Nvidia (unsurprisingly) downplayed the issue. A spokesperson noted: