Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Nvidia in $40bn acquisition of Arm; Oracle won contest for TikTok’s US business
Peter Garnry
Chief Investment Strategist
Summary: Nvidia is making a bold and in our view correct $40bn bid for SoftBank Group's computer chip business Arm. It will cement Nvidia as one of the most influential and important computer chip makers in the world but put right in the middle of the US-China technology arms race. Oracle shares are up 9% in pre-mkt trading on the news that it has won the bid for TikTok's US business beating Microsoft to the finish line.
Yesterday SoftBank Group announced that it is selling its chip-design company Arm which is bought in 2016 to Nvidia for $40bn in deal financed with stock and cash. Arm has some of the world’s most important patents and chip-designs for semiconductors and the acquisition will cement Nvidia’s position as one of the leading computer chip manufacturers in 21st century. SoftBank Group shares were up 9% in Japanese trading and Nvidia shares are up 5% in pre-market trading.
With the acquisition Nvidia is catapulted directly into the technology arms race between the US and China more than it already was. Arm has a lucrative business in China and the Chinese regulators could block that part of the acquisition as a key technology transfer from a more neutral country such as Japan to an American technology company could be viewed as a threat in Beijing.
Dusty database company Oracle gets social media flavour
Microsoft was long thought to end up being the winner in the bid to acquire TikTok’s US business which was forced by the White House to find an alternative operational model in the US. However, over the weekend Oracle announced that it had won the bid for TikTok’s US business by offering a partnership model instead of an outright purchase. Oracle will become a ‘trusted tech partner’ according to source whatever that means. Oracle has so far not released a press release so we do not know what the framework is other than the news says that the solution will be ‘secure’ for Americans. Oracle shares are up 9% in pre-market trading showing how a little sprinkle of social media can suddenly change the appeal for investors. We still find it weird that one of the most laser-focused enterprise software businesses in the US suddenly wants to enter the social media arena.
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