The Nvidia stock forecast was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary

• I gave NVDA stock a price target of $388 last June 9. The stock is now trading above $405. My Nvidia stock forecast again endorses it as a buy.
• Nvidia’s bold intention to buy ARM Holdings from troubled SoftBank Group could push the stock above $460.
• ARM Holdings is the intellectual property license owner of ARM processors used by drones, surveillance cameras, smartphones, tablets, ChromeBooks, laptops, smart devices and other Internet of Things products.
• If the deal pushes through, Nvidia will have the power on who could get or renew their license to design and manufacture ARM-based processors.

Nvidia (NVDA) is very profitable and has lots of cash. It did not surprise me that Nvidia is reportedly in talks to buy ARM Holdings from SoftBank. This development could lead to Nvidia owning the sole right on which companies can get (or renew) a license to design, manufacture, and use ARM-based processors. If the deal pushes through, Nvidia can also steer how ARM processors should go forward. My fearless forecast is that NVDA can trade above $460 if it gets to own/control ARM Holdings.

NVDA stock already boasts a 1-year gain of +130.67%. NVDA stock has quickly risen above my June 9 Nvidia stock forecast price target of $388. You can take your profits and run right now, or you can hold on and wait if SoftBank will really sell ARM Holdings to Nvidia. ARM Holdings + Nvidia is a potent combination because of Nvidia’s unchallenged leadership in HPC computers for data centers and AI acceleration.

The Future Importance of Arm Holdings

The best future economic benefit of Nvidia buying ARM Holdings is it could lead to more powerful data center and AI processors from Nvidia. Taking control of Arm Holdings means Nvidia can ensure its very expensive products (like the DGX SuperPod A100) remain the best data center accelerator/AI processors. Going forward, Nvidia can develop and use better ARM processors for its own welfare. Nvidia can just license inferior ARM designs to other companies to make sure they do not threaten Nvidia’s big lead in data center processors and AI accelerators.

In other words, the plan to acquire ARM Holdings is a defensive move from Nvidia. It will create a stronger moat around Nvidia’s lucrative, fast-growing data center business. The chart below is prima facie proof that the Data Center segment is now the most important growth driver of Nvidia. Three to five more quarters and the Data Center segment will likely generate a greater quarterly revenue than Gaming segment.

The other benefit of controlling ARM Holdings could also help Nvidia make a second attempt to disrupt the smartphone/tablet application processor market. Control of ARM Holdings will let Nvidia build better Tegra smartphone processors than Qualcomm (QCOM) and Apple (AAPL). There is really nothing in this world that can stop an Nvidia-controlled ARM Holdings from rejecting Qualcomm or Apple’s future application to renew their ARM licenses. The current right of any company to make and use ARM processors have expiration dates.

Nvidia’s Tegra business is now only dependent on how many Switch consoles that Nintendo wants (NTDOY). Nvidia knows that the $30 billion application processors market is still growing and it could become bigger than the x86 pc processor industry that Intel (INTC) and AMD dominates (AMD).

NVDA Can Afford It

The fearless investing strategy of SoftBank saw it suffer recently. SoftBank is desperately in need of cash due to its hemorrhaging Vision Fund investing mistakes. If Nvidia makes a good cash (or cash + stock offer), SoftBank will likely sell ARM Holdings. SoftBank bought ARM Holdings for $32 billion in July 2016. Nvidia can offer $20 billion for 51% controlling stake in ARM Holdings and SoftBank will likely accept it. Nvidia does not really need full ownership of ARM Holdings. It only needs controlling stake so it can decide the fate of decisions of ARM Holdings.

Nvidia has a very healthy balance sheet and strong cash flow. It can easily afford a $20 million cash offer to take control of ARM Holdings. Based on the chart below, NVDA touts a total cash reserve of $16.35 billion and TTM net operating cash flow of $4.95 billion. Nvidia can use $12 billion of its cash and issue $8 billion in new NVDA shares to finance its takeover of ARM Holdings.

Conclusion

The reported intention of Nvidia to buy ARM Holdings is a good reason to stay long (or buy more shares) on NVDA. Taking control of ARM Holdings will allow Nvidia to fortify the moat around its very lucrative Data Center business. The Data Center segment’s rapid growth is why NVDA has sky-high valuation ratios.

The reason why NVDA touts a super high TTM EV/Sales (20.42) and Price/Sales (21.01) valuation multiple is because investors put super high future valuation on the Data Center potential of Nvidia. These ratios will only get higher if Nvidia makes a successful bid for ARM Holdings.

Past I Know First Nvidia Stock Forecast Success

I Know First has been bullish on NVDA stock in past forecasts. On April 1^st, 2020, the I Know First algorithm issued a bullish forecast for NVDA stock price. This algorithmic trading tool successfully forecasted the movement of the NVDA stock in three months, NVDA stock price has risen by 44.61% in line with the I Know First algorithm’s forecast. See charts below.

Here at I Know First, our algorithmic trading AI have modeled and predicted more than 10500 asset price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. We provide stock picking strategies for institutional clients, as well as private investors to identify the best investment opportunities in the market. We have various packages of daily stock market forecast, such as Bitcoin price prediction, top tech stocks as well as Forex predictions, and Apple stock news. Today, we also provide gold predictions and commodity price prediction.

To subscribe today click here.

Please note-for trading decisions use the most recent forecast