What happened
Shares of chipmaker NVIDIA (NVDA 4.35%) were up on Monday after competitor Broadcom (AVGO 1.64%) came out in support of the company's proposed acquisition of U.K. chip designer Arm. NVIDIA also announced a new partnership with Alphabet's (GOOG 1.43%) (GOOGL 1.42%) Google to create an artificial intelligence (AI) and 5G innovation hub. Shares were up by about 5% as of 11:48 a.m. EDT today.
Image source: Getty Images.
So what
NVIDIA's proposed acquisition of Arm spooked some of its chipmaking competitors, as the companies were worried that NVIDIA could use monopolistic tactics by restricting the use of Arm's technology or raising its prices to unsustainable levels. However, in a recent statement, Broadcom CEO Hock Tan came out in support of the Arm deal, saying that NVIDIA has assured the chip industry that it will invest in Arm's technology and keep it open for all companies to use. While the acquisition still hasn't gone through, this statement was likely well received by investors.
On other fronts, NVIDIA is partnering with Google Cloud to combine both companies' capabilities in AI, building a platform that other enterprises can access. It will combine Google Cloud's Anthos platform and NVIDIA's accelerated computing hardware to sell AI-focused cloud tools.
Now what
Shares of NVIDIA are up almost 250% in the last three years as the company has grown its gaming, cryptocurrency, and data-center chip businesses. The company's market cap is $475 billion, and the stock now trades at a forward price-to-earnings ratio (P/E) of 47, which is expensive relative to the average stock on the market.
But if you are an investor in this company, there's no reason to sell your shares anytime soon. With all these partnerships, the potential Arm deal, and the continued growth of the computer chip industry, NVIDIA should be able to grow its earnings for years to come.
