NVIDIA (NASDAQ:NVDA) versus ARM (NASDAQ:ARM) Critical Survey

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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for ARM and NVIDIA, as reported by MarketBeat.

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

ARM presently has a consensus target price of $305.72, suggesting a potential upside of 10.92%. NVIDIA has a consensus target price of $324.34, suggesting a potential upside of 45.92%. Given NVIDIA’s stronger consensus rating and higher probable upside, analysts clearly believe NVIDIA is more favorable than ARM.

Profitability

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

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

Risk & Volatility

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

Valuation and Earnings

This table compares ARM and NVIDIA”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.92 billion	59.83	$904.00 million	$0.97	284.13
NVIDIA	$215.94 billion	24.81	$120.07 billion	$7.91	28.10

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 and Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 65.3% of NVIDIA shares are held by institutional investors. 3.9% of NVIDIA shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

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

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.

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.