Nvidia Drops After Touching Record on Arm Deal Prospects

(Bloomberg) -- Nvidia Corp. notched a small decline after touching an all-time high Friday amid growing anticipation about whether the chipmaker will win regulatory approval for its proposed acquisition of Arm Ltd.

The stock rose as much as 3.9% before erasing the gains to close down 0.1%. So far in June, the stock is up more than 14%, putting it on track for its biggest one-month gain since August.

The month’s advance started after Nvidia Chief Executive Officer Jensen Huang said he remains confident that regulators will approve the company’s acquisition of Arm from Japan’s Softbank Group Corp. This view was reinforced when Huang and Arm CEO Simon Segars spoke at the Six Five Summit on Thursday.

“If Nvidia’s aim was to use a public forum to showcase what a combination with Arm would mean for the broader ecosystem, along with allaying fears about Arm losing its independence, then the company went a long way in accomplishing that by having both the CEOs jointly take questions,” wrote BMO Capital Markets analyst Ambrish Srivastava.

Jefferies expects that both Nvidia and Arm will “become more visible in articulating the benefits of the deal, which we think will translate to improved sentiment” and an expanded multiple for Nvidia. Analyst Mark Lipacis added there currently is skepticism that the deal will clear regulatory hurdles.

Earlier this week, Jefferies reiterated its buy rating on Nvidia and raised its price target. BofA raised its own target on Friday, to $900, a level that eclipses what had been Jefferies’s Street-high view. Nvidia’s computing franchise is “uniquely leverageable across large, growing, still-nascent markets,” BofA wrote.

Nvidia has risen more than 40% this year, making it the second-best performer among Philadelphia Semiconductor Index, behind Applied Materials. The industry’s benchmark index is up about 14% in 2021.

(Updates with closing prices.)

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