Is Intel chatting up Nvidia or is such a marriage even a good match? It depends whom you ask. But Nvidia shares have certainly done a little dance.
Nvidia shares Wednesday tacked on $2.78, or 9 percent, to reach $31.08 in more than double the normal trading volume. Shares were also just $0.80 shy of touching the company’s 52-week high of $31.88 set June 8.
Nvidia shares on Thursday dropped $0.67 to $30.41 in recent trading, while Intel shares fell $0.09 to $20.73.
Santa Clara, California-based Nvidia makes graphics chips, media and communications processors, and handheld graphic processing units (GPUs), which are dedicated graphics-rendering chips used in PCs, workstations, and game consoles.
Eyes have turned to Nvidia as a likely acquisition candidate ever since No. 2 chip maker Advanced Micro Devices agreed to acquire ATI Technologies, one of the world’s top suppliers of computer graphics chip and boards, for $5.4 billion in July (AMD Corrals ATI for $5.4B).
Advanced Micro DevicesAMD Corrals ATI for $5.4BAnalysts, however, are mixed on the prospects for an Intel-Nvidia deal.
Merrill Lynch analyst Joe Osha wrote in a research note Thursday entitled “No Deal” that there has been rampant speculation as to whether Intel might acquire Nvidia, but he doesn’t think it’s going to happen.
analyst Joe Osha wrote in a research note Thursday entitled “No Deal” that there has been rampant speculation as to whether Intel might acquire Nvidia, but he doesn’t think it’s going to happen.
“We think it’s wrong to assume that Nvidia must be a potential target for Intel just because AMD is buying ATI Technologies,” Mr. Osha wrote. “What AMD wanted out of its deal was a workable platform strategy. Intel has that already.”
The analyst also noted that Intel and Nvidia have different manufacturing processes that wouldn’t match up. On the one hand, Intel’s manufacturing is tuned to high volumes and slower product cycles. On the other hand, Nvidia’s GPU cycles are quicker.
Mr. Osha also noted that the coming launch of Microsoft’s Windows Vista could have an upside for Nvidia GPUs, driving its market share. This could give shareholders another reason to hold out as a stand-alone company.
Partners by Necessity
Meanwhile, Kintisheff Research analyst Tsvetan Kintisheff wrote in a research note Thursday that No. 1 chip maker Intel faced a “highly negative development” strategically when AMD agreed to acquire ATI.
Mr. Kintisheff said that as a result of the AMD-ATI deal, “Intel has quickly turned to Nvidia as the GPU partner of choice and demonstrated systems based on Nvidia graphics on two recent occasions—the Core 2 Duo product launch event and the fall IDF.”
The original plan, Mr. Kintisheff noted, had been to use ATI products at both launch events.
“Intel has no choice but to work with the GPU vendor at any terms now—in fact, this is a key rationale for Intel to buy Nvidia. A partner with huge bargaining power might be bought out and turned into a subsidiary,” he noted.
At this point in the bet on chips, the cards are in Nvidia’s hands.
Contact the writer: SMartin@RedHerring.com
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