In August 2021, the Competition and Markets Authority (CMA) launched an investigation into NVDA’s planned acquisition of U.K. technology company ARM on national and competition concerns. Furthermore, yesterday, Nadine Dorries, Britain’s Secretary of State for Digital, Culture, Media and Sport, ordered an in-depth Phase Two probe of the proposed acquisition. The stock is also trading at an expensive valuation. In terms of forward EV/S and P/S, NVDA’s 29.17x and 29.08x, respectively, are higher than the 4.31x and 4.29x industry averages. So, we think it could be wise to wait for a better entry point in the stock.
As the world’s demand for consumer electronics and automobiles increases, the demand for semiconductors is also expected to continue growing. According to a report by PWC, the market for AI-related semiconductors is expected to grow from a current $6 billion to more than $30 billion by 2022. So, instead of betting on NVDA, we think it could be wise to bet on shares of quality semiconductor companies Broadcom Inc. (AVGO), QUALCOMM Incorporated (NASDAQ:QCOM), and NXP Semiconductors N.V. (NXPI) because they’re well-positioned to capitalize on the industry tailwinds. These stocks are rated A (Strong Buy) in our proprietary POWR Ratings system.