Nomura Securities on Semiconductors: Intel Plus NVIDIA Would Be A Scary Combination

May 29, 2012 8:16 AM EDT
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Nomura Securities on Semiconductors: Intel plus NVIDIA Would Be A Scary Combination

Analyst, Romit Shah, said, "Semiconductor stocks could outperform in the second half of 2012, but we would be more aggressive on confirmation that bookings and backlog are holding up in June. Our sector view is Neutral. Top long ideas are Broadcom (Nasdaq: BRCM), Nvidia (Nasdaq: NVDA), and Avago (Nasdaq: AVGO). Top short ideas are Intel (Nasdaq: INTC), Marvell (Nasdaq: MRVL), and Altera (Nasdaq: ALTR)."

"We believe Nvidia would make a good strategic fit for Intel. On the surface, a merger between two companies that want to capture a larger share of the PC bill of materials and become larger in mobile seems an obvious thing to consider. However, we are not implying that any such combination will take place, as regulatory hurdles could be high and CEO Jen-Hsun Huang’s estimation of what Nvidia is worth may greatly exceed what Intel would be willing to pay."

"Most important, if Nvidia’s chips were manufactured internally at Intel, this could deliver a major blow to TSMC (and by definition Qualcomm (Nasdaq: QCOM)), which relies heavily on Nvidia to amortize costs at the leading edge. Nvidia accounts for roughly 40% of 28nm wafers at TSMC. Considering premiums (50-100%) on recent acquisitions, Nvidia’s shares could fetch $18-$24 per share or a valuation of about $11-15bn, and still be modestly accretive."

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