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Why Nvidia Stock Short-Circuited This Morning

By Rich Smith – Aug 31, 2021 at 1:34PM

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Tesla weighs in against the Nvidia-Arm merger.

What happened

Shares of Nvidia (NVDA -1.51%) had dipped 2% as of 10:22 a.m. EDT Tuesday, possibly in response to an article in the British newspaper The Telegraph over the weekend. In that report, the paper described rising opposition to the semiconductor giant acquiring its British peer, Arm Holdings, from SoftBank Group (SFTB.Y -0.09%) in a deal valued at $40 billion. And in particular, The Telegraph mentioned the arrival of a new critic of the deal: Elon Musk.

Short circuit on a semiconductor chip

Image source: Getty Images.

So what

As The Telegraph reports, an ongoing U.S. Federal Trade Commission examination of Nvidia's deal to acquire Arm has already attracted support from corporate giants Amazon (AMZN -0.77%) and Samsung, which worry that a combined Nvidia and Arm would dominate the supply of data-center chip designs.

Now, Musk's Tesla (TSLA -0.19%) is apparently joining the fray (although Tesla, which no longer possesses a media department, failed to respond to the newspaper's request for a comment).

Now what

From the perspective of Amazon and Samsung, a tie-up between Nvidia and Arm could be seen as bad for Amazon (which might end up paying higher prices for chips at Amazon Web Services) and for Samsung (which would face a much tougher competitor in selling chips).

It's not 100% clear what Tesla's opposition to the Nvidia-Arm merger is, however. In the absence of confirmation from the automaker, The Telegraph could only report that the company has "signaled competition concerns."

Still, when you consider that Tesla switched away from buying Nvidia chips for its electric cars a couple of years ago, and is now designing its own chips (which Samsung manufactures), it seems logical that in this ongoing dispute between Nvidia and its opposition, Tesla would side with the opposing team.  

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Nvidia, and Tesla. The Motley Fool recommends Softbank Group and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nvidia Stock Quote
$162.70 (-1.51%) $-2.49
Amazon Stock Quote
$93.41 (-0.77%) $0.72
Tesla Stock Quote
$182.86 (-0.19%) $0.34
SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
$21.82 (-0.09%) $0.02

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