Nvidia’s (NASDAQ: NVDA) current stock market dominance is due to the company’s ability to serve the booming artificial intelligence (AI) sector; however, a past failed acquisition is emerging as a likely missed opportunity.
In this line, on September 13, 2020, Nvidia announced that it had reached a deal to acquire British-based semiconductor design company Arm Holdings in a transaction valued at $40 billion.
However, the deal collapsed in February 2022 due to significant regulatory hurdles, forcing Arm Holdings to seek a stock market flotation as an alternative.
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Besides the regulatory obstacle, fierce opposition hampered the deal, with competitors such as Qualcomm (NASDAQ: QCOM) raising concerns that it would stifle market competition.
Since the deal fell through, Arm Holdings went public and has seen its value skyrocket to over $160 billion. The firm started trading on September 15 for $60.75 and has rallied by over 140% to trade at $147 as of press time, with a year-to-date rally of 114%.
At the same time, the Cambridge-based firm has seen significant revenue growth, with the value at $939 million for Q2 2024, reflecting an almost 40% year-over-year increase. On the other hand, net income grew $112 million YoY to hit $223 million.
Arm’s bullish outlook
Indeed, Arm Holdings continues to have a bullish outlook for the coming months after it emerged that it has a partnership with technology giant Apple (NASDAQ: AAPL) to power the iPhone 16 series. Analysts also back this outlook.
For instance, Raymond James analyst Srini Pajjuri gave the stock an “outperform” rating with a price target of $160.
“As the dominant supplier of energy-efficient processor/subsystems IP (intellectual property), Arm is well-positioned to benefit from rapid growth of GenAI (generative artificial intelligence) in the cloud and at the edge,” Pajjuri said.
Overall, the dramatic surge in Arm’s valuation amplifies the narrative that Nvidia missed out on what could have been a transformational acquisition. If the deal had gone through, Nvidia would have fortified its position against AI, cloud computing, and chip market rivals.
Nvidia ignores missed opportunity to thrive
For Nvidia, the missed opportunity has not impeded its growth. The company continues to thrive, particularly in AI chips. This trend helped Nvidia to become the world’s most valuable company, at some point surpassing a market cap of over $3 trillion.
A review of NVDA stock movement shows that the equity is witnessing bearish sentiments in the short term, trading at $118 with daily losses of 0.20%. However, Nvidia has surged146% in 2024.
Overall, while Nvidia has rallied significantly, the magnitude of the company’s growth if the acquisition had gone through will never be known. In the meantime, shareholders continue to reap returns through stock appreciation and dividends, as Finbold reported.
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