Nvidia's Arm Acquisition: A New Era of Innovation and Growth

In a recent note, Jefferies analyst Mark Lipacis highlighted the potential for Nvidia's acquisition of Arm to revolutionize the company's business model. According to Lipacis, the acquisition will enable ARM to expand its reach beyond mobile devices and into new markets such as data centers, automotive, and IoT.

Lipacis believes that Nvidia's plan to bring ARM to these new markets is a key driver behind his increased price target for Nvidia stock. He notes that the company's expectation of closing the Arm acquisition in early 2022 will likely have a positive impact on its financials. Additionally, Lipacis sees potential for software licensing to become a significant revenue stream for Nvidia, particularly in the data center market.

The analyst points out that enterprise AI software in the data center can be licensed similarly to how VMware licenses its system software. This could lead to a new revenue line item for Nvidia's financials, which would be a significant departure from the company's current business model of primarily selling hardware.

Lipacis' increased price target of $854 per share is the highest listed on FactSet, and comes after a recent conversation with Nvidia's chief financial officer, Colette Kress. The analyst believes that the company's prospects are looking up following this conversation, which highlighted the potential for software licensing in the data center.

Nvidia's stock has responded positively to Lipacis' note, rising 2.8% in morning trading on Thursday. As the company continues to execute its strategy and drive innovation through its acquisition of Arm, investors can expect further growth and excitement from this tech giant.

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