Nvidia Corp. (NVDA) saw a recent dip in value while still maintaining an impressive growth trend over the past two years. The technology company significantly outperformed the S&P 500, rising by approximately 268.4% compared to the S&P’s gain of about 35.3%. Hedge funds were actively buying the stock in the third quarter, and Nvidia rose on the WhaleWisdom Heatmap to a ranking of fourteen from eighteen.
Nvidia designs and manufactures computer graphics processors, computer chipsets, and multimedia software. The company operates through a Graphics Processing Unit and Tegra Processor segment. Nvidia’s graphics processing unit (GPU) technology powers computers worldwide, speeding up the completion of intensive computational tasks for consumers and appealing to a range of business professionals and scientists. Its enterprise chips appeal to data centers, researchers, the gaming industry, and automakers who leverage Nvidia’s technology to process large volumes of data for decision making.
As Nvidia continues to pursue strategic business expansion, it hit a snag related to its proposed acquisition of UK chip designer Arm Ltd. from Japanese technology giant SoftBank. Nvidia announced the acquisition in the Fall of 2020. Since then, it has faced regulatory scrutiny by the US, UK, Europe, and China over concerns that it could reduce competition, restrict access to ARM’s semiconductor designs, and reduce industry innovation. Concern that the deal may be blocked contributed to Nvidia’s recent dip in share value.
Hedge Funds Are Enthusiastic
Nvidia had a solid third quarter, and the aggregate 13F shares held by hedge funds increased to about 284.2 million from 280.3 million, an increase of approximately 1.4%. Of the hedge funds, 38 created new positions, 178 added to an existing position, 29 closed out their position, and 180 reduced their position. Institutions were selling, with aggregate holdings decreasing by about 5.1% to approximately 1.6 billion from about 1.7 billion.
Encouraging Multiyear Figures
Analysts expect to see earnings rise over the next two years, with increases in growth estimated to bring earnings per share to $4.33 by January 2022 and $5.19 by January 2023. Year-over-year estimated increases could also bring revenue close to $31.5 billion by 2023, up from a predicted $26.7 billion in 2022. The long-term 13F metrics between 2002 and 2022 suggest that Nvidia remains on an upward trend.
Analysts Weigh in on Arm
Analysts shared their views on the heavily scrutinized Arm acquisition deal. While Nvidia’s shares were down over speculation that regulators would block the acquisition plan, Nvidia hasn’t thrown in the towel. It is still seeking to convince regulators of the benefits of the acquisition to the industry. While Nvidia’s CFO had reported in November that it was committed to the purchase, Bloomberg L.P. more recently reported that the company is quietly planning to end its acquisition attempt amid regulatory pushback and lawsuits. Analyst Matt Bryson from Wedbush Securities Inc. shared his belief that regulatory approval of the deal is unlikely. Rob Enderle of Enderle Group shared that failing to acquire Arm would give Nvidia the ability to effectively block other potential buyers from restricting Nvidia’s future access to Arm’s technology. While not acquiring Arm would be an initial setback to Nvidia’s business aspirations, Nvidia still has the opportunity to partner with the intellectual property vendor.
Nvidia’s stock may have recently lost some ground, but the technology company has shown considerable overall growth. Hedge funds were buying and estimates through 2023 look favorable. Nvidia holds long-term potential, and its recently lowered share value may be appealing to investors.