Here's What We're Watching on Nvidia After Surprising $20 Billion Acquisition News

We hope everyone had a wonderful holiday weekend and that you’re getting ready to ring in the new year later this week.

In our last few weekly Roundups, we shared that we would be on guard for companies looking to squeak by earnings pre-announcements when investor attention was at its most focused. We did not expect to see Nvidia (NVDA) make its biggest acquisition announcement on Christmas Eve, but as you’ve likely read by now, that is exactly what the company did.

Nvidia announced it will spend $20 billion in cash to acquire AI chip startup company Groq, with CEO Jensen Huang sharing plans to “integrate Groq’s low-latency processors into the NVIDIA AI factory architecture, extending the platform to serve an even broader range of AI inference and real-time workloads.”

Groq has been targeting revenue of $500 million this year amid booming demand for AI accelerator chips used in speeding up the process for large language models to complete inference-related tasks. Prior reports about Groq noted its aim to compete with Nvidia in inference chips, which means Nvidia used its impressive net cash balance sheet to remove a competitive threat while bolstering its own position. Exiting October, Nvidia had $60.6 billion in cash and equivalents on its balance sheet after generating an even larger amount of operating cash flow over the last three quarters. With Nvidia’s EPS expected to rise more than 60% in the coming year to $7.55 per share, the company should continue to generate a hefty amount of cash.

We are seeing a generally positive response to this move by Nvidia. We do like the strategic rationale as well as Nvidia flexing its balance sheet to help extend its competitive lead. However, much like our comment about the $7.75 billion that ServiceNow (NOW) is paying to acquire cybersecurity company Armis, the valuation Nvidia is paying for Groq is a hefty one.

This means that, just like ServiceNow CEO Bill McDermott having to lay out a cohesive case for buying Armis, including cross-marketing and revenue generation synergies to cost reductions and margin enhancers, Nvidia’s Huang will have to do the same.

We aren’t likely to get McDermott’s comments and insights until ServiceNow reports its December quarter results, but with Huang keynoting CES 2026 week, we could get answers much sooner. We expect Jensen will lay out a sweeping, multi-year vision of AI adoption and usage that should be a positive catalyst for NVDA shares as well as those for Marvell (MRVL) , Broadcom (AVGO) , Arista Networks (ANET) and Eaton (ETN) . As we think about his comments the night of January 5, we’ll be contrasting them against those made during AMD (AMD) CEO Lisa Su’s keynote later that day.

Once we’ve digested those comments, we’ll revisit our NVDA price tag as well as any others that warrant adjusting.

Connecting M&A Dots

Connecting the dots as we like to do, we are likely to see a competitive response from others in the chip and hyperscaler space to Nvidia’s move with Groq. That would support our thinking that M&A activity would continue at a brisk pace in 2026.

Helping support that thinking was this morning’s announcement that SoftBank (SFTBY) would acquire data center company Digital Bridge (DBRG) for $4 billion. The rationale put forth by that SoftBank move is that it fits with the larger strategy to invest in digital infrastructure “fueling the AI boom.”

As we see it, that potential, along with similar prospects for the IPO market next year, speaks to why we continue to own Morgan Stanley (MS) and Bank of America (BAC) shares in the Portfolio.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long NVDA, NOW, MRVL, AVGO, ANET, ETN, MS and BAC.