How Nvidia overtook Intel

Nvidia’s deal to acquire chip designer ARM for $40B would solidify the company’s position as America’s top chip maker.


September 14, 2020

In early July, Nvidia became America’s #1 chipmaker by market cap, surpassing its much older rival, Intel, for the first time.

Today, Nvidia is worth $300B while Intel is worth $210B. And with reports that Nvidia is set to acquire UK-based chip designer ARM from Softbank for $40B, that gap might grow even bigger.

Nvidia built its advantage by riding the right trends

Founded in 1993, the Santa Clara-based firm has seen its value increase ~22x in the past 5 years. This is largely thanks to several major  developments:

  • Demand for gaming and AI
    Nvidia began as a producer of graphics processing units (GPUs), which are now heavily used in the gaming industry, and for AI computing.
  • The transition to “fabless” chip making
    Unlike Intel, Nvidia doesn’t own any chip fabrication plants. Instead, the firm designs its chips and outsources production to specialized foundries, like the $385B Taiwan Semiconductor Manufacturing Company (TMSC).

Along with Microsoft, Intel was synonymous with the PC 

Founded in 1968, Intel came to dominate the PC market in the 1990s and early 2000s.

However, the success of Intel’s PC business hamstrung efforts to effectively compete in the lower margin (but much faster growing) smartphone chip market. With PCs on the decline, Intel’s growth has become reliant on high-end data centers (which Nvidia is increasingly encroaching on).

Two further blows hit in 2020:

  1. Intel’s next gen of chips has encountered major delays
  2. Apple replaced Intel chips with ARM for its new Macbook lines

Why Nvidia’s ARM deal could be huge  

ARM’s energy-efficient designs have been used to create 160B chips — and buying the firm would boost Nvidia’s position in smartphones, tablets and internet-of-things (IOT) hardware.

However, the Wall Street Journal notes some potential deal roadblocks:

  • British politicians didn’t love Softbank’s $32B acquisition of ARM in 2016 and may not love it this time, either
  • There are concerns the deal may negatively impact the escalating US-China chip wars

We have a more pressing question. If the deal happens, which portmanteau is better: NvARM or Armidia?

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