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Indra Bhattacharjee's Avatar
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Mar 12, 2019

Nvidia’s (NVDA, $163.31) surprising acquisition of Mellanox (MLNX, $118.07)

Analysts are still trying to figure out what Nvidia Corporation’s $6.9 billion acquisition of Mellanox Technologies Ltd. could mean for the long term, as the two companies’ businesses overlap very little.

Nvidia is famous for its state-of-the-art graphics oriented chips. Over the years, it has seen an upsurge of its usage and relevance across new workloads, especially in data center markets including applications in high-performance computing and artificial intelligence.

Mellanox, on the other hand, specializes in networking chip and card making and has very little to do with actual computing. It is unclear what the combination of the two could mean in terms of revenue as both technologies already work side by side on the same servers used in high workloads.

Analysts argue that Mellanox’s $1.1 billion revenue will not be transformational for Nvidia. But Mellanox's 24.8% operating margin under Nvidia’s control might help improve the operating margins to more than 30%.  Nvidia’s gross margins in 2018 came in at 69.2%. As such, the deal should be accretive to Nvidia within the first year given the attractive metrics.

Even though there is no product overlap between the two companies, the acquisition could be seen as Nvidia’s attempt to diversify its offerings and improve its competitive standing against other large data centers and networking rivals. Nvidia’s focus on AI could be a potential competition to China’s growing interest in the field.

Overall, Nvidia’s acquisition of Mellanox seems like a long-term bet that computing and networking will one day come together.

Related Ticker: NVDA

NVDA's Indicator enters downward trend

The Aroon Indicator for NVDA entered a downward trend on April 15, 2024. Tickeron's A.I.dvisor identified a pattern where the AroonDown red line was above 70 while the AroonUp green line was below 30 for three straight days. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options. A.I.dvisor looked at 146 similar instances where the Aroon Indicator formed such a pattern. In of the 146 cases the stock moved lower. This puts the odds of a downward move at .

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The 10-day RSI Indicator for NVDA moved out of overbought territory on March 26, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 49 similar instances where the indicator moved out of overbought territory. In of the 49 cases, the stock moved lower in the following days. This puts the odds of a move lower at .

The Momentum Indicator moved below the 0 level on April 12, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on NVDA as a result. In of 75 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .

Following a 3-day decline, the stock is projected to fall further. Considering past instances where NVDA declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

Bullish Trend Analysis

The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 44 cases where NVDA's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where NVDA advanced for three days, in of 364 cases, the price rose further within the following month. The odds of a continued upward trend are .

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 62, placing this stock better than average.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. NVDA’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: NVDA's P/B Ratio (50.000) is very high in comparison to the industry average of (6.496). P/E Ratio (72.056) is within average values for comparable stocks, (118.875). Projected Growth (PEG Ratio) (1.159) is also within normal values, averaging (2.563). NVDA has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.021). P/S Ratio (35.211) is also within normal values, averaging (34.705).

Notable companies

The most notable companies in this group are NVIDIA Corp (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Ltd (NYSE:TSM), Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD), QUALCOMM (NASDAQ:QCOM), Applied Materials (NASDAQ:AMAT), Intel Corp (NASDAQ:INTC), Texas Instruments (NASDAQ:TXN), Micron Technology (NASDAQ:MU), Lam Research Corp (NASDAQ:LRCX).

Industry description

The semiconductor industry manufacturers all chip-related products, including research and development. These chips are used in innumerable electronic devices, including computers, cell phones, smartphones, and GPSs. Intel Corporation, NVIDIA Corp., and Broadcomm are some of the prominent players in this industry. Semiconductor companies usually tend to do well during periods of healthy economic growth, thereby inducing further research and development in the industry – which in turn augurs well for productivity and growth in the economy. In the near future, demand for semiconductor products (and possibly innovation within the segment) should only expand further, with the proliferation of 5G, autonomous vehicles, IoT, and various AI-driven electronics set to herald a new, advanced chapter in the technology-driven world as we know it. With burgeoning prospects comes great competition. In 2015, SIA estimated that U.S. semiconductor industry ranks as the second most competitive U.S. industry out of 2882 U.S. industries designated manufacturers by the U.S. Census Bureau.

Market Cap

The average market capitalization across the Semiconductors Industry is 40.91B. The market cap for tickers in the group ranges from 13.43K to 2.15T. NVDA holds the highest valuation in this group at 2.15T. The lowest valued company is CYBL at 13.43K.

High and low price notable news

The average weekly price growth across all stocks in the Semiconductors Industry was -5%. For the same Industry, the average monthly price growth was -3%, and the average quarterly price growth was 41%. IQEPF experienced the highest price growth at 44%, while SPVNF experienced the biggest fall at -84%.

Volume

The average weekly volume growth across all stocks in the Semiconductors Industry was 14%. For the same stocks of the Industry, the average monthly volume growth was -42% and the average quarterly volume growth was 17%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 58
P/E Growth Rating: 47
Price Growth Rating: 80
SMR Rating: 69
Profit Risk Rating: 62
Seasonality Score: -19 (-100 ... +100)
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General Information

a manufacturer of computer graphics processors, chipsets, and related multimedia software

Industry Semiconductors

Profile
Fundamentals
Details
Industry
Semiconductors
Address
2788 San Tomas Expressway
Phone
+1 408 486-2000
Employees
29600
Web
https://www.nvidia.com
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