The battle for big tech supremacy took an interesting turn when Nvidia overtook Facebook to become the seventh-largest company in the US. While Facebook stock plummeted over 30% this week, Nvidia has enjoyed a massive rise in value. But with Nvidia’s failed purchase of the Arm chip designer, there are questions about which tech brand will come out on top.
Facebook’s fall from grace came after reports of a slowdown in user growth and dwindling advertising revenues. Such bad news has brought down the social media giant’s market cap to $631 billion at the time of writing, whereas Nvidia’s market cap has gradually grown to an impressive $667 billion.
Such a change of circumstances is all the more impressive as Nvidia was having a tough time a few years ago where its share price was significantly lower. Like most tech firms, Nvidia had a rocky start to 2022, but has mounted a solid comeback. As it stands, the Nvidia stock price is back up to $267.05 which is well over 40% higher than the low point suffered earlier this year.
Nvidia’s charge towards success is remarkable as most tech companies have suffered from the global silicon shortage. While the likes of Apple saw sales of its iPad stall following the supply chain crisis, Nvidia powered through to enjoy a solid final quarter of last year.
Nvidia’s next quarterly earnings report is due to land later this month and it’s widely expected to show that the chip maker will enjoy an astonishing 50% year-on-year rise in revenues. Plus with a rapid growth in net income and margin gains, 2022 is looking very good for Nvidia.
Nvidia currently holds an incredibly strong position in the market, but it suffered a momentary stutter this week when its takeover of the British chip designer, Arm, collapsed. It was supposed to have been a $40 billion takeover, but regulatory hurdles meant that the deal could not go through. With widespread opposition to the deal from the Federal Trade Commission, the EU and China, it is believed that Arm will seek a stock market flotation in 2023 instead.
Nvidia has had to pay a $1.25 billion break-up fee to Arm’s parent company – Softbank – as a result of the collapse of what should have been the largest deal in the semiconductor industry. While the lack of deal will have been frustrating for Nvidia, the brand states that it would stay close to Arm due to Arm’s strategic importance in the, ‘computer processing unit architecture of the next decade.’
Thankfully the lack of deal with Arm doesn’t seem to have affected Nvidia’s market position. Stocks in Nvidia remained relatively stable despite the disappointing news, and the chip maker is on course to perform strongly in the face of difficult economic circumstances.
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