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What's going on?
Qualcomm, one of the worlds biggest makers of chips that power smartphones, has bought European rival NXP Semiconductor for about $38 billion. Its the largest takeover ever in the chip-making industry!
What does this mean?
Qualcomm is a huge maker of smartphone chips, but it has its sights set on the opportunities that autonomous cars and the Internet of Things (IoT) present. Qualcomms CEO thinks the opportunities are akin to the years right before smartphones took over cell phones: demand for the relevant chips is, supposedly, going to skyrocket. By buying NXP, which has significant expertise in both autonomous vehicles and the IoT, Qualcomm is positioning itself to capitalize on these opportunities.
Why should I care?
For the stocks: Qualcomm investors love this deal.
Its normal for the stock price of the company being acquired to increase (because the buyer usually pays a premium to acquire the target), but the acquirers stock often goes down. Not in this case though: Qualcomms stock is up more than 10% since news of this deal was first leaked a few weeks ago!
The bigger picture: This is the second big bet on the Internet of Things this year.
In June, Japanese tech giant Softbank bought UK-based chipmaker Arm Holdings. Why? It thinks the IoT will massively increase demand for chips. Ditto Qualcomm. If these buyers are right (and, since they work with most of the worlds biggest tech companies, they have a well-informed view of future trends), other companies that are leveraged to these trends should be setting up well for future growth.
Originally posted as part of the Finimize daily email.
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