NVIDIA Stock Forecast: NVDA price barely reacts to FTC seeking to block Arm acquisition

FTC sued NVIDIA to block its merger with Arm on December 2.
NVDA stock barely budging in the premarket.
Wall Street did not expect the merger to proceed.

Clay Webster FXStreet

Nvidia's (NVDA) 14-month acquisition saga may finally be coming to an end. Late on Thursday, the US Federal Trade Commission (FTC) announced a lawsuit to block NVIDIA's proposed merger with the UK-based Arm – one of the most prolific designers of semiconductor chips used in many smartphones and medical devices. NVDA investors could not care less with the stock still closing up more than 2%. NVDA stock is down just 0.6% at $319.23 in Friday's premarket.

Nvidia (NVDA) Stock News: FTC sues over Arm deal

The Federal Trade Commission announced it lawsuit to block the Arm deal late on Thursday. NVIDIA offered $40 billion to buy Arm from Japan's SoftBank back in September 2020. The deal has been stalled for more than a year as UK regulators and politicians debate the merits of the deal.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said FTC Bureau of Competition Director Holly Vedova in a statement. “Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals."

One important issue with the deal is that Arm has plenty of access to proprietary information from many of its semiconductor partners, who do not want their competitor NVIDIA to view.

The FTC named three specific chip sectors that they propose would be particularly poorly affected by a merger. High-level advanced driver assistance systems for passenger cars, DPU SmartNICs for data centers and Arm-based CPUs for cloud providers would all be prone to anti-competitive forces in the case of a merger.

The four-member FTC commission voted unanimously to bring the complaint. The administrative hearing will not begin until August 9, 2022, though. In September 2022, if the deal fails to proceed, SoftBank gets to pocket a $1.25 billion downpayment fee.

NVDA key statistics

Market Cap	$834 billion
Price/Earnings	103
Price/Sales	35
Price/Book	35
Enterprise Value	$827 billion
Operating Margin	35%
Profit Margin	34%
52-week high	$346.47
52-week low	$115.67
Short Interest	1%
Average Wall Street Rating and Price Target	Buy, $337.54

Nvidia (NVDA) Stock Forecast: MACD looks bearish

The FTC news barely played a role in Thursday's price movement. The news came while the market was still open, but NVDA dropped imperceptibly and closed up 2.2% at $321.26. Though the stock has dropped 0.6% in Friday's premarket, the price action makes it seem as if this news was already priced in. Indeed, some analysts said they were unsurprised since NVIDIA executives sounded less optimistic in the most recent earnings call.

NVDA stock remains inside an ascending price channel that began a month back on November 4. Thursday's open happened right on the lower trend line and proceeded to rise from there.

One note of concern is the Moving Average Convergence Divergence (MACD), which crossed lower at the end of November. This bearish sign could spell trouble if the differential continues to widen and both lines move back toward zero.

A break below the 20-day moving average at $311.89 or breaking through the bottom trend line of the price channel at $310.68 would signal that a correction is in play

NVDA 1-day chart

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Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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