Donald Trump’s return to the White House is having a big impact on the market as investors grapple with what his second term will look like. In broad terms, he’s seen as “pro-business” and “pro-markets.” Campaign promises are one thing, but what will his actual policy agenda be?
Until he takes office, much of this remains conjecture, but whom the president-elect chooses to surround himself with — cabinet members, advisors, agency leadership — can tell us a lot about the shape of that policy agenda.
That’s why Trump’s recent announcement that he will replace President Joe Biden’s Federal Trade Commission (FTC) Chair Lina Khan with Andrew Ferguson is fantastic news for Nvidia (NVDA 3.08%) investors.
Khan took a hard line against mergers and acquisitions
Under Kahn’s leadership, the FTC pursued an aggressive agenda against large-scale mergers and acquisitions (M&A). Khan’s FTC doesn’t discriminate — its most recent major action blocked a $25 billion merger between Kroger and Albertsons — but much of the focus has been on big tech, including Nvidia.
In 2022, the FTC nixed a $40 billion merger between Nvidia and Arm Holdings, which would have been the largest in the semiconductor industry to date. The move was a blow to Nvidia, which hoped to expand its reach beyond GPUs to CPUs and the mobile device market. Still, Nvidia has obviously done quite well in the last few years despite the failed merger and Khan insists the FTC’s action led to more innovation within both companies.
Whether you buy Khan’s argument or not, M&A is a powerful tool for companies to create value and quickly pivot without having to spend years building up an entirely new business. For investors, Nvidia’s ability to pursue M&A without facing regulatory hurdles is a net positive.
The new chair may say he has big tech in his crosshairs, but there’s a wrinkle
Ferguson, Trump’s pick to replace Khan as FTC chair, served on the commission under Khan since earlier this year. At first blush, it may seem that he will continue Khan’s fight against big tech; Ferguson found common ground with Khan on this issue. However, it seems that their motives and choice of which firms to go after may differ.
Ferguson’s targets seem to be narrower, focusing on big tech players involved in social media and information like Alphabet and Meta Platforms. Ferguson and Trump are much more concerned with issues of free speech and issues of bias they perceive in these consumer-facing companies. Nvidia doesn’t fit this mold and while its major clients do, the FTC’s actions under its new leadership will likely be more symbolic than harmful to their bottom lines.
In fact, in a memo, Ferguson said he intends to “reverse Lina Khan’s anti-business agenda” and roll back some of the artificial intelligence (AI) initiatives and regulations the FTC has proposed. Wedbush analyst Dan Ives believes that he will reverse Khan’s “anti-tech agenda including ending efforts to regulate AI and abandoning a brutal standard for any merger of any size for the tech world.” He added, “Christmas came early for the tech world.”
Nvidia could pursue more mergers
With Ferguson at the helm of the FTC, Nvidia could potentially attempt its Arm merger once more. However, it’s unclear if the company would want to pursue the deal at this point. After the deal fell through, Arm went public and its current market capitalization is almost 4 times what the deal was worth. Nvidia already has a partial stake, however, worth about $280 million.
Still, there are lots of opportunities for M&A out there. I think it’s likely that Nvidia will make a few key moves in the coming years to help it continue to dominate the AI market and now it is unlikely to face major scrutiny from the FTC. Even if Nvidia doesn’t pursue M&A directly, the more “pro-business” approach will benefit the company and is one more reason Nvidia’s near future looks promising.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.