Nvidia To Buy Softbank’s Arm Holdings For $40B

Nvidia Corp. put speculation on rest and confirmed entering into an agreement to snap up the chip design company Arm Holdings from Softbank in a cash-stock deal valued at $40 billion . The graphic chip behemoth said that the boards of all the three parties have approved the transaction.

Under the terms of the deal, Nvidia (NVDA) will pay $12 billion in cash and $21.5 billion in common stock. The total consideration of the deal also includes $5 billion in performance-based earn-out to Softbank and $1.5 billion in equity compensation to Arm’s existing employees. The transaction is expected to be immediately accretive to Nvidia’s non-GAAP gross margin and non-GAAP earnings per share, the company said.

Nvidia’s CEO Jensen Huang said, “This combination has tremendous benefits for both companies, our customers, and the industry. For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with Nvidia’s world-leading GPU and AI technology.” (See NVDA stock analysis on TipRanks).

The deal is expected to be completed within 18 months.

On September 2, Needham analyst Rajvindra Gill reiterated his Buy rating on the stock and a price target of $600 (23.3% upside potential) following Nvidia’s launch of GeForce RTX 30 Series GPUs on September 1.

In his note to investors, Gill said, “We expect the RTX will fuel the 20% Q/Q growth in gaming in F3Q as we believe we are entering the biggest gaming cycles in recent history, fueled by both strong Nintendo Switch sales and robust adoption of RTX 30 Series GPUs.”

NVDA stock has surged nearly 107% year-to-date, and the Street has a Strong Buy analyst consensus. The average analyst price target of $546 implies further upside potential of 12.2% from current levels.   

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