In mid September Nvidia (NVDA) announced that it was acquiring chip designer Arm from SoftBank for $40 billion, SoftBank paid $31 billion in 2016 (well done SoftBank). I think this deal is worth paying attention to – that’s not a unique view. The semiconductor sector is changing and those changes will likely impact other sectors. So what does this transaction mean? Only time will tell. For now, in my view, better understanding these companies and this sector is going to be generally useful. We’ll start with some basics today.
Nvidia was founded in 1993 and is the premier GPU (graphics processing unit) maker. What is a GPU and how is it different from a CPU (Central Processing Unit)?
The giant of the CPU market that you have likely heard of is Intel Corp (INTC), founded in 1968 by Robert Noyce and Gordon Moore (Moore’s Law).
Some basic differences between CPUs and GPUs:
CPU
GPU
Central Processing Unit
Graphics Processing Unit
Several cores
Many cores
Low latency
High throughput
Good for serial processing
Good for parallel processing
Can do a handful of operations at once
Can do thousands of operations at once
Source: Nvidia Corporation
Applications for GPUs have traditionally been in gaming and that remains a significant part of the business. However, the use environments for GPUs have grown considerably, two areas of note are Machine Learning (ML) and Artificial Intelligence (AI). ML and AI are being deployed across sectors, hence, a deeper understanding of their use cases is important.
Further down the field form GPUs are FPGAs, the recently reported potential AMD (AMD) – Xilinx (XLNX) deal is in part a demonstration of their relevance (more on this in another blog). What are FPGAs?
“Field Programmable Gate Arrays (FPGAs) are semiconductor devices that are based around a matrix of configurable logic blocks (CLBs) connected via programmable interconnects. FPGAs can be reprogrammed to desired application or functionality requirements after manufacturing. This feature distinguishes FPGAs from Application Specific Integrated Circuits (ASICs), which are custom manufactured for specific design tasks. Although one-time programmable (OTP) FPGAs are available, the dominant types are SRAM based which can be reprogrammed as the design evolves.” (source: Xilinx.com)
Now back to the Nvidia (NVDA) – Arm deal, and it’s not a done deal, to be completed it will need regulatory approval across multiple jurisdictions. As of now that approval seems to be more likely than not, however, not certain. We’ll continue to pay attention to this transaction and generally to what’s happening in the semiconductor sector. These companies enable many other companies across industries to grow and respond to ever changing customer needs – considering autonomous driving as an example. Thank you for reading and have a great day.
At the GW Investment Institute (GWII) we work to be relentless, resilient, and reliable.
We think our relentless effort will continue to create opportunities for our students, staff, faculty, alumni, and friends.
The pace for semester is now accelerating and our expectations for our students are high. That said, we’re optimistic that we can properly teach and train our student portfolio managers/analysts to better position the GWII portfolios for new opportunities and to be more resilient in the face of uncertainty.
We are thankful for the many opportunities we have and for the many partnerships we have with our colleagues, alumni, and friends. We’ll continue to work to be more reliable for all of you, thank you.
And, importantly here in the U.S., September 11th is a day for reflection and remembrance, let’s resolve to be more relentless, resilient, and reliable.
If you’re following the equity markets closely (there could be good reasons not to, by the way), you’ll likely have noticed today’s sharp retracement, the S&P 500 Index closed down -3.48% and the tech-centric NASDAQ Composite Index finished down -4.96% on the day. It’s been a few months since we saw such a move down, mostly the market has been moving higher since the calendar year lows in late March.
The market is a present value estimation of the discounted future value, and when the discount rate is historically low, i.e., low interest rates – we should expect higher present values, that’s math, it works. That said, has the market moved too far and too fast. Is it well ahead of the real economy? Are the current financial expectations exceeding what the real economy can deliver in the associated timeframe? The duration and impact of COVID-19 make these questions difficult to answer. Further, when will an effective vaccine be ready: soon? never? When will it be widely distributed: soon? never? These ranges are wide, making any type of modeling for future scenarios less than highly reliable.
Maybe the wisdom of the crowd will get this right, but maybe it does not have it sorted out quite yet. In the meantime, a balanced view of the way forward may serve us well. We’ll focus on the areas where the world is going, where demand is going, and where we can have a positive impact. Let’s use the current difficulties and uncertainties to strengthen. Happy Labor Day.
The equity market, represented as an individual person wants to move higher, is optimistic and ready for whatever’s next. This outlook is powered in part by low interest rates and by a COVID-19 induced bifurcation of corporate winners and losers. Technology broadly represents some of the big winners, and old-line retail represents some of the losers – generally companies that had not and could not adapt to the new environment.
The economic impact of COVID-19 seems to be an accelerant for changes that were already underway. For example, old-line retail was not doing a fabulous job pre-COVID-19, the move to virtual everything just pushed them to the brink, some beyond – think Lord & Taylor, J.C. Penny, and Neiman Marcus. Meanwhile Amazon as no real surprise to anyone using Prime which has more than 100 million subscribers is leading the way in retail seemingly built for this type of environment, and some traditional brick-and-mortar, i.e., Walmart and Target are finding ways to adapt, for example Walmart’s Pickup and delivery especially for groceries.
So what can we glean from this? Some of the trends mentioned above were already in place pre-COVID-19, and what can we do to move forward? We can look to identify trends that may increase the probability of us making intelligent capital allocation decisions and we can move in that direction. As far as where the market is going, I have no idea.
The landscape is changing rapidly and the frontier is out there. We are aiming to think of ways to participate in the evolution of the space industry. This past spring semester we had student teams in the GW Investment Institute associated venture course study and work on ideas that could be part of the new space industry. Here are their ideas:
Lunachix – create the technology behind products that women need to ensure that they have freedom to decide how they treat their period – whether on Earth or in space.
4MY Partners – outer space asset management and services.
Buzz Solutions – provide comprehensive master planning and project management solutions to investors and clients working on the mining of water in space.
VantaBlack – lunar nuclear reactor using kilopower nuclear reactor technology.
Scobo – empowering people analytics with big data and machine learning.
This fall semester we’ll be asking a new set of student teams to develop their own ideas for the space industry. We’ll keep you posted on our progress.
To say that the market has been a bit all over the place since the start of 2020 would not quite be descriptive enough. Along with the market the GW Investment Institute (GWII) Student Investment Fund portfolios have risen, fallen, and risen back again, let’s see what’s next. While the investment environment continues to be highly uncertain, principally driven by what impact COVID-19 will have moving forward, we continue to move forward with our work at GWII to educate and train our students as well as research and development. We aim to help our students become better investors and better business people.
Our students have worked diligently and we are proud of their work. Our first official quarterly report is for the period ending June 30, 2020. In the past we have posted GWII data on an ad hoc basis, however, moving forward we look forward to providing you with these quarterly reports.
As the COVID-19 pandemic races through the U.S. and other parts of the world, one important consideration is to think how we can help to stop, slow, and/or better manage the situation. There has been an unprecedented need for Personal Protective Equipment (PPE) and therefore shortages. If you would like to help in the D.C, Maryland, Virginia (DMV) area, please consider providing funding to help our GW Personal Protective Equipment Factory. This is a GW team led by Professor James Huckenpahler, an adjunct digital lab instructor in the Corcoran School of Art and Design. The team is using 3D printers to produce PPE for the GW Hospital, as well as donating PPE to organizations in DC, Prince George’s county in Maryland, and parts of northern Virginia, see GW Today article for further detail. GW Community Collaborates to Produce PPEs for Hospital Workers.
If you would like to make a gift to support this GW PPE Factory effort, please use this link and in the comment field type “for GW PPE Factory”. All funds raised will go directly to purchasing materials and equipment to produce additional PPE for GW and the DC area. Thank you, every dollar will help.
Thanks for being part of our community, stay safe and be well.
