Nvidia Shares Goosed By Rumors That Intel Will Buy It

Includes: INTC, NVDA
by: Eric Savitz
Reuters reported yesterday that there were widespread rumors that Intel (NASDAQ:INTC) might be planning to acquire Nvidia (NASDAQ:NVDA). The story said that the rumor was spreading quickly around Wall Street options trading desks.

Rumors of an Intel/Nvidia deal are nothing new
; there has been speculation about such a deal almost from the moment in July that Advanced Micro Devices (NYSE:AMD) announced a deal to acquire ATI Technologies (ATYT), Nvidia’s chief rival in the graphics processor market. The rumor is a little hard to believe. For one thing, it seems unlikely that Intel, now in cost-cutting mode, would want to shell out the whopping sum it would take to buy Nvida, which as of yesterday’s close had a market cap of nearly $11 billion. For another, unlike AMD, Intel offers its customers an integrated graphics solution that does not require a standalone graphics processor.

Here’s what Merril Lynch’s Sidney Ho said in July in response to speculation about an Intel bid for Nvidia, as quoted in a previous blog post here on Tech Trader Daily:

Unlike AMD, Intel already has a well-established [graphics] chipset business, which is a key part of its platform strategy. Based on our analysis of the microprocessor market, Intel is also less likely to see excess capacity, so there’s no need to buy businesses to fill the fabs. In the end, we think Nvidia will be the lone [graphics processor] company, fighting for market share that is getting increasingly difficult to get.

Nvidia shares today rose $2.78 to$31.01.

NVDA 1-yr chart:

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