Not AMD. Not Broadcom. This is the Chip Designer Nvidia Investors Should Be Watching
2026-10-16 08:44
•Keith Speights •The Motley Fool
••••• •••••••••• Axe Cap view
Why Nvidia Investors Should Watch Arm, Not Just AMD or Broadcom
Arm’s critical role in chip design supports Nvidia's growth, but its premium valuation calls for caution.
Nvidia’s success leans heavily on Arm’s chip architecture, powering its Vera CPUs with royalty-driven revenue that’s predictably solid, hitting $1.3 billion recently. Arm controls over half the hyperscaler market, a key growth engine as cloud demand surges. Unlike AMD or Broadcom, Arm doesn’t compete with Nvidia—it enables it. But Arm’s steep valuation, around 150 times forward earnings, feels stretched. For South African investors, this means watching USD/ZAR closely since these tech trends feed through to rand volatility and investor sentiment around growth stocks like Naspers and Prosus, which have big stakes in global tech. If Arm stumbles or valuation pressure mounts, it could temper appetite for these counters. Still, continued cloud expansion supports the narrative. Risks include a tech selloff or slower Nvidia adoption of Arm-based CPUs. this is just our opinion and not financial advice
Watch Arm as a barometer for Nvidia's chip lead but avoid buying at current multiples; prefer holding Prosus and Naspers selectively, trimming if USD/ZAR weakens below 18.50.
- USD/ZAR
- Prosus
- Naspers
- Tech sector valuation correction
- Weaker USD/ZAR hurting offshore inflows
6/10
Arm Holdings is a critical chip designer that Nvidia investors should monitor closely. Unlike AMD and Broadcom, Arm doesn't compete with Nvidia but rather supplies the architecture that powers Nvidia's Vera CPUs. Arm's licensing model generates predictable revenue streams, with royalties comprising 55% of Q1 FY2027 revenue of $1.3 billion. The company has captured over 50% of the hyperscaler market and continues strong growth, though its valuation at 150x forward earnings is steep compared to peers.
Our take is based on reporting first published by The Motley Fool.