Nvidia (NASDAQ:NVDA) soared to a record high this year, thanks to the company’s strong pace of innovation. The company manufactures 3D-chips and processors which play a key role in today’s technology-first environment. Although NVDA stock got off to a rough start in 2018, the tech giant has since picked up the broken pieces.
Today, Nvidia, although not a household name, is the chipmaker for most smartphones. Given its dominant position in the market, it is considered one of the best tech stocks to buy. The company rallied at an impressive 135% this year and it doesn’t look like it’s stopping any time soon. In a volatile economy, Nvidia is a safe bet on all counts.
Nvidia Stock Goes Big With Arm Deal
In what will be one of the biggest mergers in the chip industry, Nvidia announced that it will acquire Arm for $40 billion. The company is a part of the global conglomerate Soft Bank Group. Nvidia will fund the purchase with $21.5 billion in stock and $12 billion in cash. Based on the company’s financial performance, Softbank will receive additional stock.
A merger with Arm, which is the chipmaker for 95% of the world’s smartphones, could be a gamechanger. This acquisition will push NVDA stock to new highs with access to a greater share of the market. Nvidia is a fast-growing player in the U.S. chip industry and a deal with Arm will do wonders for its share price.
But the deal does come with its problems. Tensions between the U.S. and China have risen over the last few months with the ban on apps like TikTok. This means that the merger between Nvidia and Arm will face increased scrutiny from regulatory authorities. Moreover, it’s also possible that China is not too pleased with the idea that a national company will be sold to a U.S. firm.
Nevertheless, the merger will elevate Nvidia’s already strong position in the market. The company had a historic year and even hit a trading record at $589.07 on Sept. 2. For investors, this makes NVDA stock a great investment in any environment.
A New Chip Will Change the Game
Nvidia had a rough couple of years after its IPO in 2018 but has been on a winning streak this year. The chipmaker powers some of the biggest names in the smartphone industry but one of its most popular customers is Nintendo (OTCMKTS:NTDOY). By extension, Nvidia manufactures the gaming chips used in video games like Fortnite.
Last month the company announced the release of Ampere, a high-tech chip for the new gaming generation. Unlike its predecessors, the chip comes with better computing performance and ray-tracing. But its biggest competitive advantage is the price. Ampere will cost $500 to manufacture but have all the same features as the company’s $1,000 Turing chip.
As reported by The Wall Street Journal, the release of Ampere has led the company to project optimistic videogame revenue. In its upcoming quarter, the chipmaker expects a 25% increase in revenue from Q2 and a 28% surge for the fiscal year. This videogame revenue could take NVDA stock to the next level.
Analysts concur with this sentiment. According to The Motley Fool BMO Capital analyst, Ambrish Srivastava hiked his price forecast from $565 to $650. With a growing market and an increased pace of innovation, Srivastava believes that the company’s growth is in “overdrive.” The Street also believes Nvidia is poised for 17% growth annually.
With an optimistic outlook and game-changing chip under its belt, this stock is a solid investment.
The Bottom Line On NVDA Stock
Tech stocks have dominated the markets for much of this year and Nvidia is no different. The company’s core products, its chips, are a key ingredient in the remote work environment. This will translate to higher growth levels in the coming months. To add to this, Nvidia’s deal with Arm will strengthen its position in the market. Although this will come with its regulatory hurdles, the potential for growth is vast when the deal goes through.
Given the optics, Nvidia is poised for much greater upside. It would be wise to place your bets on this stock before prices go higher in the coming months.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.