Semiconductor plays Nvidia and AMD got a boost to their share prices after news of the US government possibly buying a machine based on their chips.
- Nvidia (Nasdaq: NVDA) share price rises to US$222.13 on Wednesday (25 Aug)
- Advanced Micro Devices (Nasdaq: AMD) hits US$108.30 per share
- The US government is reportedly nearing a deal for a Nvidia and AMD supercomputer
- Nvidia’s takeover of a UK firm has prompted competition and security concerns
- Keen to trade Nvidia shares? Open an account with us to start trading the stock.
Nvidia, AMD counters clock gains
Shares of Nvidia and Advanced Micro Devices (AMD) both finished higher on Wednesday, following a news report that the US was close to purchasing a supercomputer made with chips from the two California-based semiconductor firms.
Chip giant Nvidia, whose graphics cards are favoured in the video-game industry, saw its stock climbing 1.9% to close at US$222.13.
AMD, which also develops computer processors, advanced 0.6% to end at US$108.30.
Amid the global chip shortage, AMD recently said it had responded to limited industry capacity by focusing on selling only its most profitable chips.
As of Thursday, research teams were largely positive on market leader Nvidia, with 38 ‘buy’ calls, five ‘hold’ recommendations, and three suggesting ‘sell’. Their average 12-month target price was US$220.88, according to Bloomberg data.
Meanwhile, AMD attracted 25 ‘buy’ ratings, 16 ‘hold’ calls, and two ‘sell’ recommendations from analysts, with an average target price of US$111.25.
On Wednesday, Reuters cited analysts as saying that retail inflows into Nvidia and AMD have been so large that they outpaced the combined inflows into the entire FAANGM (Facebook, Amazon, Apple, Netflix, Google, and Microsoft) complex for the first time in a rallying market.
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*Based on revenue excluding FX (published financial statements, June 2020)
Potential supercomputer deal powers optimism
On Tuesday, Reuters reported that the US Department of Energy would soon ink a deal to buy a supercomputer, to be named Polaris, based on Nvidia’s A100 chips and AMD’s Rome and Milan chips.
In the meantime, the US is waiting for a larger supercomputer, from semiconductor behemoth Intel Corp (Nasdaq: INTC), which has seen a months-long delay.
Polaris is slated to come online this year, and will be a test machine for the department’s Argonne National Laboratory to prepare its software for the Intel-based Aurora machine, according to Reuters. The US’ supercomputers do scientific work in areas including healthcare and climate research, as well as perform virtual testing of nuclear weapons.
The Nvidia and AMD supercomputer will not be as powerful as Aurora, Reuters added.
Nvidia’s mega takeover of UK chip designer hits hurdle
Separately, Nvidia’s proposed US$40 billion acquisition of British semiconductor designer Arm Ltd now faces a major obstacle.
UK regulator Competition and Markets Authority (CMA) last Friday said the deal raises ‘serious competition concerns’ and could also require an in-depth investigation on national security grounds.
CMA flagged that the takeover may possibly hurt rivals by limiting their access to key technologies, cause price increases for semiconductors, and ultimately stifle innovation in a number of important and growing markets.
The chip technology sector is ‘vital’ to everyday products, said CMA chief Andrea Coscelli.
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Kelvin Ong | Financial writer, Singapore
26 August 2021