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Author: Alan LittleDate: 2020-09-15

Nvidia (NVDA) shares up 6.25% on $40bn Arm deal

Nvidia (NVDA) shares climbed 6.25% in trading on Monday after the semiconductor company confirmed a $40bn deal to purchase UK-based Arm Holdings from SoftBank.

Nvidia CEO Jensen Huang said that the “combination makes financial sense” in a statement and revealed that the deal would take around 12 months to close.

Arm Holdings, which is based in Cambridge, is a leader in the mobile tech industry where its architecture has been used in the vast majority of chipsets, including those in Apple’s iPhones.

Nvidia hopes that it can leverage its own AI computing capabilities with Arm’s vast ecosystem, which powers other devices in addition to smartphones, such as hard drives and video cameras.

Huang added: “Our combination will create a company fabulously positioned for the age of AI.”

Nvidia will acquire Arm from Japanese company SoftBank, which purchased the chip designer back in 2016 in a $32bn deal.

Arm is expected to continue to operate in the UK after Nvidia completes the sale.

The move was hailed by analyst Jim Cramer, who said that it could be “game, set, match” for Nvidia as it attempts to edge out Intel and other close rivals in the chip-making space.

The positivity surrounding the announcement was reflected on the stock market on Monday.

After the session started on the Nasdaq, NVDA shares quickly made gains of 8.25% for a new $527.96 share price.

Nvidia shares recently soared on the reveal of a new powerful line of GPUs, the 3070 series, which will start going on sale later this week.

Analysts remain very bullish on NVDA stock with 31 buy ratings compared to just four at hold and three at sell.

The consensus price target is $507.31.

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