Why Nvidia Stock Shorted Today

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What happened

Charts and crypto-mining semiconductor maker stocks Nvidia (NASDAQ: NVDA) fell for a fourth straight day on Friday, falling another 4% through 3:20 p.m. EDT.

You can probably thank Intelligence (NASDAQ: INTC) – and The Wall Street Journal – for that.

Image source: Getty Images.

So what

As the WSJ reported today, Intel is “in talks” to buy rival Advanced micro-systems(NASDAQ: AMD) former chip production division, GlobalFoundries, in a deal valued at $ 30 billion.

The deal, if true, would be Intel’s largest acquisition ever and make Intel a major player in the contract chip manufacturing market – a market currently dominated by Semiconductor manufacturing in Taiwan (NYSE: TSM), and a marketplace used by Nvidia.

The combination would not directly affect Nvidia, which, according to data from S&P Global Market Intelligence, uses Taiwan Semiconductor as its main subcontractor. This would be interesting in a larger industrial context, however, as GlobalFoundries still provides contract manufacturing services to AMD (as does Taiwan Semiconductor).

Now what

In short, rumor of the deal would increase Intel’s market power, and perhaps by extension minimize that of Nvidia. However, this acquisition is not a certainty.

the WSJ makes it clear that acceptance of a buyout by GlobalFoundries is not “guaranteed”. In addition, the newspaper claims that GlobalFoundries’ own executives do not appear to be involved in the negotiations, and even denies that they are in talks with Intel. (The implication being that Intel is negotiating directly with the owner of GlobalFoundries, Mubadala Investment of Abu Dhabi.)

Yet if there’s one thing the stock market hates, it’s uncertainty. Until we have a clearer picture of exactly what Intel is doing – and if it will be successful – Nvidia investors may remain nervous about the outcome.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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