Market Analysis: nVidia and Intel

So what happened to nVidia, ATI’s archenemy, during this same time period?

On the day AMD announced it was going to buy ATI, nVidia stock closed at $19.56, a 10% increase over the price of the previous business day. On the day after the last trading day of ATI stock, October 25th, 2006, nVidia stock closed at $32.80 – a 67.7% increase! And July 20th, 2007 nVidia stock closed at $45.10, an unbelievable 130% increase in just one year. Who bought $5,000 in AMD shares one year ago would have today $4,585, while if you had bought nVidia you would have $11,500!

How about the size of the company? On July 21st 2006 the market evaluated nVidia as worth $6.2 billion, on the day AMD announced they were going to buy ATI nVidia market cap increased to $6.9 billion (values based on 352.5 million outstanding stocks). Today the market says nVidia is worth $16.4 billion (based on 362.9 million outstanding stocks).

What!?!? Wait a moment! That was exactly what should have happened to AMD! Oh-oh. Backfire! So what happened is that even though AMD buying ATI “made sense”, the market thinks that the company that benefited the most from this merger was nVidia!

That is even more impressive if we remember that ATI was a $5 billion company when it was sold to AMD.

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Figure 3: nVidia stock performance.

And how about Intel? Well, Intel is a different story, because it is far bigger than AMD, as it designs and develops several other products besides PC processors.

Anyway, On July 21st 2006 Intel stock closed at $17.15, closing at $17.48 on the day AMD announced it was going to buy ATI. However, on July 19th, 2006 Intel stock closed at $18.49, dropping 7.25% in two days. On the last day of trade of ATI stock Intel closed at $21.62. And July 20th, 2007 Intel closed at $24.55.

If you bought Intel instead of AMD on the day AMD announced they would buy ATI, you would have accumulated a 40.45% profit in one year. That is amazing.

The market valuated Intel on July 21st 2006 as a $99 billion company. On the last day of ATI trading Intel was valuated as a $125 billion company. And today Intel has a market cap of $142 billion, being almost 17 times more valuable than AMD (Intel has 5.8 billion outstanding shares).

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Figure 4: Intel stock performance.

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