Nvidia Gets New Street-High Price Target On Arm Deal: 'Ubiquitous Across Semi Industry'

NVIDIA Corporation's NVDA $40 billion deal to buy U.K. chip designer Arm Holdings has prompted an analyst at Needham to lift his price target to the highest on Street.

The Nvidia Analyst: Rajvindra Gill maintained a Buy rating on Nvidia and increased the price target from $600 to $700.

The Nvidia Thesis: Financially, the Arm acquisition would be potentially accretive, adding $1.20-$1.65 to Nvidia's earnings per share in calendar year 2022, Gill said in a Tuesday note.

The new price target is based on 52 times P/E multiple on calendar year 2022 EPS of $13.50, with $12 for base Nvidia and $1.50 for Arm.

Strategically, the Nvidia-Arm combination will create the leading AI computing platform in the semiconductor industry, Gill said. The combo will become ubiquitous across the semiconductor industry.

The combination of three processors under one house – GPUs for accelerated computing, NPUs for networking and security processing and CPUs for low latency, single thread predictable processing – positions Nvidia to be the leading AI platform in the industry, the analyst said.

Further, Nvidia can quickly bring its GPU IP to Arm's broad CPU ecosystem of smartphone, tablet, infrastructure, AI/ML, IoT and embedded automotive chips.

"The other major strategic rationale for the deal is to target the "trillions" of devices that will be connected to the data center, ranging from smart retail, smart streets, smart robotics, industrial, wearables, and auto," the analyst wrote in the note.

All those devices, he said, will be accelerated and include AI capability in the near future. The analyst estimates a $250 billion total addressable market by 2022, $95 billion devices $80 billion data center and $75 billion for auto, edge and IoT.

Nvidia shares traded around $517 at the time of publication.

Posted In: ARM HoldingsNeedhamRajvindra GillAnalyst ColorPrice TargetReiterationAnalyst RatingsTech

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.