Analyzing ARM (NASDAQ:ARM) & NVIDIA (NASDAQ:NVDA)

NVIDIA (NASDAQ:NVDA) and ARM (NASDAQ:ARM) are both large-cap technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, earnings, dividends, profitability, analyst recommendations, valuation and risk.

Analyst Ratings

This is a summary of current recommendations for NVIDIA and ARM, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NVIDIA	0	2	50	3	3.02
ARM	1	7	18	1	2.70

NVIDIA presently has a consensus target price of $324.34, suggesting a potential upside of 53.74%. ARM has a consensus target price of $305.72, suggesting a potential upside of 27.91%. Given NVIDIA’s stronger consensus rating and higher possible upside, research analysts plainly believe NVIDIA is more favorable than ARM.

Volatility & Risk

NVIDIA has a beta of 2.22, indicating that its share price is 122% more volatile than the S&P 500. Comparatively, ARM has a beta of 3.89, indicating that its share price is 289% more volatile than the S&P 500.

Profitability

This table compares NVIDIA and ARM’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NVIDIA	63.66%	96.04%	71.00%
ARM	20.25%	12.24%	9.41%

Valuation & Earnings

This table compares NVIDIA and ARM”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NVIDIA	$302.97 billion	16.78	$120.07 billion	$7.91	26.67
ARM	$5.16 billion	49.51	$904.00 million	$0.97	246.40

NVIDIA has higher revenue and earnings than ARM. NVIDIA is trading at a lower price-to-earnings ratio than ARM, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

65.3% of NVIDIA shares are owned by institutional investors. Comparatively, 7.5% of ARM shares are owned by institutional investors. 3.9% of NVIDIA shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

NVIDIA beats ARM on 12 of the 15 factors compared between the two stocks.

About NVIDIA

NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications. The Compute & Networking segment comprises Data Center computing platforms and end-to-end networking platforms, including Quantum for InfiniBand and Spectrum for Ethernet; NVIDIA DRIVE automated-driving platform and automotive development agreements; Jetson robotics and other embedded platforms; NVIDIA AI Enterprise and other software; and DGX Cloud software and services. The company's products are used in gaming, professional visualization, data center, and automotive markets. It sells its products to original equipment manufacturers, original device manufacturers, system integrators and distributors, independent software vendors, cloud service providers, consumer internet companies, add-in board manufacturers, distributors, automotive manufacturers and tier-1 automotive suppliers, and other ecosystem participants. NVIDIA Corporation was incorporated in 1993 and is headquartered in Santa Clara, California.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.