NVIDIA (NVDA) and Intel (INTC): A Merger Made in Chip Heaven?

May 29, 2012 10:02 AM EDT
Nomura Securities' analyst Romit Shah is making waves Tuesday after discussing the possible combination of NVIDIA (Nasdaq: NVDA) and Intel Corporation (Nasdaq: INTC), which he calls a "scary combination."

Shah sees NVIDIA as a "good strategic fit" for Intel. A possible merger between the two would capture a greater share of the PC bill of materials and become larger in mobile. It would seem an "obvious thing to consider," he notes. That said, Shah sees regulatory hurdles as high and NVIDIA CEO's view of the company's value may far exceed what Intel is willing to pay.

Given the trends toward more media-centric PC workloads that benefit from GPU acceleration, NVIDIA's superior graphics IP would make Intel's future CPU offerings more competitive, he notes.

In addition, a merger could accelerate Intel's engagement in mobile. "Integration of Nvidia AP and Infineon baseband would unlock the mainstream smartphone segment, which both companies are not addressing at present," the analyst comments.

If NVIDIA's chips were manufactured internally at Intel this would be a major blow to TSMC (NYSE: TSM) and by definition Qualcomm (Nasdaq: QCOM), Shah comments. NVIDIA accounts for about 40 percent of TSMC's 28nm wafters.

Discussing a possible price, Shah suggests that considering the 50-100% premium of recent deals, NVIDIA could fetch $18-$24 per share.

Shares of NVIDIA are up 1.6 percent, while Intel is up 1.2 percent.

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